CBO: Federal Healthcare Spending To Surpass All Discretionary Spending By 2016

By Elizabeth Harrington | September 5, 2012 | 3:43pm EDT

This July 28, 2011 file photo shows the Capitol Dome on Capitol Hill in Washington. (AP Photo/J. Scott Applewhite, File)

(CNSNews.com) – Under current law, federal health care spending is on pace to exceed all discretionary spending by 2016, according to the Congressional Budget Office (CBO).

The change is due to large increases in Medicare and Medicaid spending and added spending under the Affordable Care Act (Obamacare) over the next decade, a feat the Tax Foundation calls a “truly unprecedented and scary” scenario.

The nonpartisan tax research group analyzed recent CBO projections of the budget for 2012 to 2022, finding that over the next decade Medicare spending will increase from $550 billion to $1.064 trillion, while Medicaid would more than double from $253 billion to $592 billion.

In addition, new exchanges and subsidies under Obamacare will force mandatory healthcare expenditures to grow from $25 billion 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,” according to the Tax Foundation.

“This means healthcare spending will overtake all discretionary spending in 2016 – Obama’s last year in office if reelected,” the group said.

“This would be truly unprecedented, and scary, since discretionary spending represents the basic functions of government, including defense, law enforcement, roads, etc.”

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The rise in health care expenditures comes on top of automatic defense and discretionary cuts set to take effect in January 2013 as a result of last year’s failed budget deal, unless Congress takes legislative action to change the situation.

The Budget Control Act, passed in August 2011, set in motion a $1.2 trillion trigger in defense and discretionary spending reductions after a congressional super committee failed to reach an agreement on where to cut in the federal budget.  The Tax Foundation said that, prior to the agreement, healthcare spending was set to eclipse discretionary spending in 2019.

“Discretionary spending is projected to decline relative to GDP throughout the next 10 years because of the caps on discretionary funding that stem from provisions of the Budget Control Act,” the CBO reported on Aug. 22 in An Update to the Budget and Economic Outlook: Fiscal Years 2012 to 2022.

“By CBO’s estimate, discretionary spending will fall to 5.6 percent of GDP by 2022 -- the lowest level in at least 50 years,” the report said.  Total discretionary spending will be 6.2 percent of GDP in 2016.

The CBO projections mark the first time that health care spending alone would transcend all discretionary spending: the outlays generally controlled through appropriations bills in Congress.

Total entitlement spending, however, had already surpassed defense spending as a percentage of Gross Domestic Product (GDP) in 1976, according to the Heritage Foundation.   In 2012, Medicare, Medicaid and Social Security spending reached an estimated 9.7 percent of GDP, while defense spending diminished to 4.5 percent.

In 1965, defense accounted for 7.4 percent of GDP, while entitlements were 2.5 percent of GDP.

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