CBO’s Budget Outlook: A Focus on Medicare

The Congressional Budget Office (CBO) released its latest Economic and Budgetary Outlook this morning for years 2012-2022 and not surprisingly, the outlook is dismal. The CBO’s baseline projection uses numbers from current law, which assumes increased tax revenue and lower spending, including a 27 percent cut to Medicare’s physician payments and the sequestration cuts. Under that scenario, projected annual deficits shrink, averaging only 1.5 percent of GDP from 2012-2022. However, the baseline scenario is extremely unlikely, seeing as a 27 percent reduction in doctor payments would effectively ruin the Medicare program, and have previously been delayed year after year.

CBO’s second projection uses an “alternative fiscal scenario.” This model uses assumptions in which physician payments for Medicare are held constant, sequestration cuts are repealed and taxes are held near current levels. In this scenario, CBO predicts deficits on average of 5.4 percent of GDP over the ten year period.

Anyone with basic addition skills can see that continual deficits equates to insurmountable debt. Healthcare spending, and Medicare in particular, is well known to be a large contributor to the national fiscal problem, and CBO’s new projections support that entirely. Under current law, this report indicates Medicare spending is projected to grow an average of 6 percent annually. When and if there is an SGR fix, the growth will be even higher. The report states, “Because of the aging of the population and rising costs for health care, the set of budget policies that were in effect in the past cannot be maintained in the future.”

In a separate report recently published, CBO revealed  that previous Medicare cost-containment experiments failed, which doesn’t bode well for the Affordable Care Act’s pilot programs designed to cut spending.  If we cannot maintain the status quo for Medicare, and pilot programs are unlikely to deliver real solutions, how can we meet the needs of senior citizens without going bankrupt? Instead we need to enact real reform, to stop Medicare from being an open-ended entitlement and to limit taxpayers’ exposure to rising healthcare costs before one of the country’s essential programs becomes our economic downfall.