BLOGGER VS. BLOGGER: CBO Budget Projections Spark Discussion on Health Spending

Recently, the Congressional Budget Office released a budget analysis for fiscal years 2013 to 2023, lowering its past spending projections for Medicare by hundreds of billions of dollars, the New York Times reports.

The report showed that Medicare spending in FY 2023 will reach $1.079 trillion — about $137 billion lower than previous projections. According to CBO’s new estimates, Medicare spending is will remain at about 3% of the gross domestic product until 2019, when it will climb to 3.5% of GDP by 2023.

The report reignited discussions about the effects of future spending and how those projections should be measured.

Matthew Yglesias of Slate’s “MoneyBox” makes the case that health care construction is an equally important indicator to predicting future health spending increases. He writes, “Spending money on health care construction projects today is an investment in the idea that health care spending volumes will be higher in five and ten years,” adding, “The fact that we’re in an era of construction spending that’s flat in nominal terms (and thus declining in inflation-adjusted per capita terms) suggests pessimism on the part of health care providers about the idea that spending volumes will explode.”

Meanwhile, Austin Frakt, an Incidental Economist contributor, writes that the “obsessive focus on reducing or bending the curve of the health care budget is a bit misguided.” Instead, he emphasizes the importance of making health spending more efficient, rather than focusing on “whether health spending growth is slowing.” He notes that “health spending could accelerate and still be efficient.”

OUR TAKE: For decades, health care costs have steadily climbed, which has required the federal government to devote an ever-growing portion of its budget to health insurance programs. Even if the slowdown continued, health care likely will continue to consume a larger proportion of the overall budget, meaning larger deficits, cuts to federal programs or higher taxes. These and future health care spending projections should not distract from efforts to reduce the long-term budget deficit.

— by Heather Drost, staff writer