Medicare and Medicaid Cost Expected to Increase Rapidly


WASHINGTON—The cost of Medicare is expected to nearly double over the coming decade, while Medicaid will increase at an even faster rate, according to projections issued by the nonpartisan Congressional Budget Office.

Medicare's spending is expected to increase to $1,058 billion in fiscal 2022 from $565.3 billion in fiscal 2011. The program's annual spending increases—7.6 percent in fiscal 2011—are expected to slow to 1.3 percent in fiscal 2012 before accelerating to 10.7 percent in fiscal 2022.

Similarly, Medicaid spending is expected to grow to $622 billion in fiscal 2022 from $275 billion in fiscal 2011. The biggest part of the program's growth and the section with the highest rate of growth is fee-for-service critical care, which will grow an average of 11 percent annually from $101 billion in fiscal 2011 to $258 billion in fiscal 2022.

Those federal health program spending increases will contribute a growing share to record projected federal deficits. For instance, the CBO estimated that the government will incur $93 billion more than the $1.1 trillion in debt for 2012 that the agency had projected in January.

Additionally, if expected policy changes are enacted by Congress, such as wiping out accumulated physician fee cuts called for by Medicare's payment formula, accumulated annual deficits over the coming 10 years will rise from $2.9 trillion to $10.7 trillion.

Some good fiscal news in the report included an expectation that Medicare would save $107 billion in reduced prescription drug spending—primarily because of the increasing number of highly prescribed drugs for which generic versions have emerged.

Additionally, the CBO amended earlier projections that enrollment in Medicare Advantage plans would decline to 8.7 million in 2021 from 11.2 million people in 2013. Now, the agency projects enrollment will increase to 13.3 million people in 2013 before dropping to about 11 million in 2022.

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