FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.

posted on 10 August 2016

CBO Projects Substantial Increases In Spending For Social Security And Health Care Programs

from the Congressional Budget Office

-- this post authored by Xiaotong Niu and Julie Topoleski

CBO projects that spending for Social Security would increase noticeably as a share of the economy - from 4.9 percent of gross domestic product (GDP) in 2016 to 6.3 percent in 2046 - if current laws generally remained unchanged. Spending for the major health care programs is projected to grow even faster: Net outlays for those programs would increase from 5.5 percent of GDP now to 8.9 percent in 2046. (The major health care programs include Medicare, Medicaid, and the Children's Health Insurance Program, as well as spending on subsidies for health insurance purchased through the marketplaces established by the Affordable Care Act and related spending.)

About three-quarters of the increase in spending for the major health care programs would be for Medicare.

Continued growth in those programs would boost the already large share of the federal budget going to people who are 65 or older. By 2046, spending for Social Security and the major health care programs (mostly Medicare) for people 65 or older is projected to account for about half of all federal noninterest spending.

CBO's projections incorporate the assumptions that the laws governing those programs will not change and that Social Security and Medicare will pay benefits as scheduled under current law regardless of the status of the programs' trust funds. That approach is consistent with a statutory requirement that CBO's 10-year baseline projections incorporate the assumption that funding for entitlement programs is adequate to make all payments required by law.

The Aging Population and Rising Health Care Costs Are Projected to Boost Spending for Those Programs

Two factors - the aging of the population and excess cost growth in health care - account for the projected rise (with respect to GDP) in federal spending on Social Security and the major health care programs. Excess cost growth is the extent to which health care costs per beneficiary, as adjusted for demographic changes, grow faster than potential GDP per capita.

Under current law, gross spending on Social Security and the major health care programs is projected to be 16.3 percent of GDP in 2046. (Gross spending on Medicare excludes the effects of certain Medicare receipts, mostly premiums paid by enrollees.) Without aging or excess cost growth, that amount would be 10.7 percent - compared with today's value of 11.0 percent. Aging accounts for 3.3 percentage points, or roughly 60 percent of the difference. Excess cost growth accounts for the rest, 2.3 percentage points.

The Aging Population. The aging of the baby boomers and continued increases in life expectancy will substantially increase the share of the population that is 65 and older. Between 2016 and 2046, that share will increase from 15 percent to 21 percent.

Population, by Age Group

With more people over 65, there will be more Social Security beneficiaries and higher federal spending on benefits. That trend accounts for nearly all the projected long-term increase in Social Security spending as a percentage of GDP.

Aging also contributes to the projected increase in spending for the major health care programs as a share of GDP - particularly for Medicare. As the population ages, Medicare beneficiaries will make up more of the population. Beneficiaries will be older, on average, and older beneficiaries tend to have higher average spending. Both of those trends would increase Medicare spending. CBO estimates that aging explains just under half of the increase in spending for the major health care programs as a share of GDP between 2016 and 2046.

Key Factors Underlying Growth in Spending

Rising Health Care Spending per Beneficiary. Even though growth in health care spending has slowed in recent years, CBO projects that excess cost growth will be greater than zero, on average, over the next 30 years. For the major health care programs, excess cost growth accounts for just over half of the projected increase in spending as a share of GDP between 2016 and 2046. (Because such cost growth leads to higher federal debt - which slows the growth of GDP - it slightly raises projected spending for Social Security as a share of GDP.)

About the Authors

Xiaotong Niu is an analyst in the Long-Term Analysis Unit at CBO, and Julie Topoleski is chief of that unit.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical News Post Listing

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.

You can also comment using Facebook directly using he comment block below.

Econintersect Contributors


Print this page or create a PDF file of this page
Print Friendly and PDF

The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.

Take a look at what is going on inside of
Main Home
Analysis Blog
Comments on Feyerabend’s ‘Against Method’, Part III
Taking a Wrench to Healthcare
News Blog
Early Headlines: Asia Stocks Mixed, Oil Mixed, Voting Fraud, Pres. Forecast Little Changed, CETA Not Dead, Generous Iraqis, Terrorists In Pakistan, Duterte Wants Divorce From US And More
October 24, 2016 Weather and Climate Report - La Nina / El Nino?
Most Read Articles Last Week Ending 22 October
Londoners Most Uneasy About Chatting To Strangers
Average Gasoline Prices for Week Ending 24 October 2016 Now Higher Than One Year Ago
Earnings And Economic Reports: Week Starting 24 October 2016
New Findings: Anxiety Is Linked To Death From Cancer In Men
Nearly 1 In 6 European Adults Is Considered Obese
Acupuncture Is Useless
September 2016 CFNAI Super Index Moving Average Declines
Consequences Of Rising Income Inequality
America's Most Competitive Renters: Why Many Are Choosing To Rent
Historical Echoes: The Bank Teller Action Figure, Or It's All In The Packaging
Investing Blog
Slow Motion Torture
The Week Ahead: How Long For This Trading Range?
Opinion Blog
What Triggers Collapse?
The Beer Goggles Stock Market
Precious Metals Blog
Preparing For Post-Election Social Unrest
Live Markets
24Oct2016 Market Close: Wall Street Closes Higher, Quietly On Low Volume, Crude Back Up, US Dollar Trading At Resistance, Investors Remain Skeptical On Continuing Bullish Market
Amazon Books & More

.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Middle East / Africa
USA Government

Crowdfunding ....



Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved