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CBO: Federal Healthcare Spending Will Exceed Discretionary Spending by 2016

2 min readBy: William McBride

Romney and Ryan are receiving the usual Mediscare treatment for their plans to reform healthcare entitlements. Paul Krugman, for instance, refers to their proposal to allow private companies to compete for Medicare dollars as “VoucherCare.” So what would happen in the absence of reform?

The chart below shows projected federal spending on healthcare under current law over the next decade, according to the Congressional Budget Office (CBO). Medicare will almost double over the next decade, from $550 billion this year to $1.064 trillion in 2022. Medicaid will more than double, from $253 billion this year to $592 billion in 2022. The biggest growth is in other mandatory healthcare programs, mainly the new Obamacare exchanges and subsidies, which are due to grow from $25 billion this year to $181 billion in 2022.

In total, healthcare entitlement spending is due to more than double, from $828 billion this year to $1.837 trillion in 2022. This means healthcare spending will overtake all discretionary spending in 2016 – Obama’s last year in office if reelected. This would be truly unprecedented, and scary, since discretionary spending represents the basic functions of government, including defense, law enforcement, roads, etc. Defense spending in particular is due to drop dramatically next year as a result of the budget deal negotiated last summer. Prior to this deal, healthcare entitlements were due to overtake discretionary spending in 2019. Also, the CBO has increased their estimated costs of Obamacare.


Update: Peter Suderman at Reason provides evidence that private insurance does control costs better than public insurance, contradicting Krugman’s claim that no such evidence exists.

Follow William McBride on Twitter @EconoWill