Social Security, health spending to hit $3.2 trillion a year

WASHINGTON Tue Feb 5, 2013 5:48pm EST

Related Topics

WASHINGTON (Reuters) - Spending on Social Security and healthcare will double to $3.2 trillion a year over the next decade, threatening a sharp rise in national debt unless Congress acts to avoid the danger, congressional researchers warned on Tuesday.

A report from the nonpartisan Congressional Budget Office did not put forth a plan to resolve the long-term imbalance between revenues and spending on retirement and healthcare benefits. But it said that action taken now would help minimize the economic impact of whatever course lawmakers can agree on.

"Unless the laws governing these programs are changed - or the increased spending is accompanied by corresponding reductions in other spending, sufficiently higher tax revenues, or a combination of the two - debt will rise sharply relative to (the U.S. economy) after 2023," the CBO warned.

The report, CBO's latest on the U.S. budget and economic outlook, comes as President Barack Obama and Congress prepare for a showdown over the federal deficit in coming months.

"Deciding now what policy changes to make to resolve that long-term imbalance would allow for gradual implementation, which would give households, businesses and state and local governments time to plan and adjust their behavior," CBO said.

The agency estimated last June that Social Security and federal health programs would account for more than one-quarter of U.S. gross domestic product by 2037 unless laws were changed.

Federal spending for Social Security, Medicare and Medicaid stood at $1.6 trillion in 2012, with healthcare spending alone at $885 billion.

CBO predicts that annual outlays for those programs alone will top $3 trillion by 2023, with Obama's healthcare reform law adding another $134 billion in costs to provide coverage for 26 million people through new state-based healthcare exchanges.

Expanded health coverage under the reform law would cost $1.3 trillion over the next ten years, slightly higher than its forecast in August, and reach 38 million people in 2022 through the exchanges and an expansion of the Medicaid program for the poor beginning January 1, 2014, the CBO SAID.

Meanwhile, 7 million fewer people were forecast to have employer-sponsored health insurance in 2022 due to Obama's Patient Protection and Affordable Care Act. The estimate is up from August, when CBO predicted a drop of 4 million people with employer plans.

The agency said the change was due largely to the lower marginal tax rates Congress passed on January 1, which would reduce tax benefits associated with insurance provided by employers.

Medicare, the federal healthcare program for 50 million elderly and disabled Americans, is expected to remain at around 3 percent of GDP until 2019 before climbing to 3.5 percent of the economy by 2023, for a total of $1.1 trillion in spending.

Medicaid is forecast to grow to 2.2 percent of GDP by 2023 when it is projected to total $572 billion in federal spending and 84 million beneficiaries.

Social Security outlays, estimated to account for almost one quarter the government's spending next year, are projected to remain near 5 percent of GDP in most years through 2018 and then climb to reach 5.5 percent of GDP in 2023.

Despite forecasts for rising spending for Medicare and Medicaid, both are expected to grow more slowly per capita over the coming decade than they were just six months ago.

The change was due partly to expectations for lower enrollment and a larger number of young, healthier beneficiaries in the Medicaid coverage pool.

It also reflected a slowdown in spending growth for Medicare's Part A hospital, Part B physician and Part D prescription drug benefits, as younger retirees from the baby boom generation have entered the pool of beneficiaries.

(Additional reporting by David Lawder)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see
Comments (20)
Saulmonella wrote:
It’s nice to know you’ll die either from the “Death Panel” or by drone strike. Watch where you go and keep an eye to the sky! Lord Obama’s Death squads are right behind you!

Feb 05, 2013 6:42pm EST  --  Report as abuse
morbas wrote:
The federal budget is $3.8 trillion. Federal plus state plus municipality is greater than $8.06 trillion. The sum total of all personal income is $12.98 trillion. Thus, the governments are operating at 62 percent of total personal income.
With a centralized banking system, the federal government can print more money than collected in revenue; states and municipalities cannot. Taxation at state and municipal levels is less progressive than federal, which burdens the lowest income levels with the highest effective rate; and the upper 2 percent with the lowest effective rate. Thus, municipalities borrow more in a recession, as the lower quintile’ wages are more diminished. We have cities falling into bankruptcy.
Income less than $200k year? This will reduce your federal tax rates…
–Start Copy paste post to your Representative,
Fairness requires top earners pay more.
Simply put, the federal and state tax system needs to tax the money, not the people. Poverty/subsistence margin flat rate of taxation is fairness. The upper quintile views fair as the more you make the more you take home. This meets both criteria. The Washington bureaucrats missed a big opportunity to propose a margin flat rate tax that balances the budget. Rates $0-20K 0%, money above $20K 35%; couples freely share; all income bundled and taxed in summation form, no exemptions. And provide business relief with no business taxation with provisions on ‘partnership and disregarded’ businesses to transfer funds into personal accounts as the taxable income. Ends family business inheritance taxation, except when sold for personal profit (always taxable).
–End copy paste post.

The debt has one cause, the aristocratic view of superiority and exemption to responsibility, aye even subjugation of Christianity itself. They would rather mint Ceasar’s denarii and subjugate humanity to a slaves wage. The top quintile income wealth is over 60% of the national income summation. And yet we tax poverty levels to hoard even that last 1% of coin. And tax least at the highest income levels.

This proposal would require a National Level of politics that reaches amendment level approval. This would require a national constituency letter writing outcry, that which has not been seen.

Feb 05, 2013 6:55pm EST  --  Report as abuse
The Generation that has the most income is now costing me the most in taxes. While Heir-Bamo is taking the rest of what I have and giving it to those who have worked the least for it and deserve even less. Bizarre-O world is now here.

Feb 05, 2013 6:57pm EST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

Full focus