NCPA - National Center for Policy Analysis


February 27, 2008

Driven by the aging of the baby-boom generation and rising costs of new drugs and medical technology, government spending on health care could nearly double by 2017 to more than $2 trillion, according to the Centers for Medicare and Medicaid Services.


  • Health-care spending in the United States will hit $4.3 trillion by 2017, nearly double the 2007 amount; equating to nearly 20 percent of gross domestic product.
  • In 2007, health-care spending accounted for 16.3 percent of GDP, but more of that cost is expected to shift to government agencies -- even as the federal government struggles to shrink huge deficits.
  • Medicare spending alone is expected to grow to $844 billion in 2017, up from $427 billion in 2007.

In addition:

  • Health-care spending will grow on average 6.7 percent in the next decade, outpacing the general economy by 1.9 percentage points each year.
  • The growth will mainly be driven by medical prices and increased usage as well as smaller factors such as population growth and its changing mix.
  • Private spending on health care is expected to grow at a slower pace, from 6.6 percent in 2009 to 5.9 percent in 2017, partly because of the cost shift to the government.

There also will be a shift toward the private arm of Medicare, which tends to cost the government more.  By 2017, 27.5 percent of eligible Medicare enrollees are expected to enroll in managed-care plans, compared with 16.4 percent in 2006, the study's authors said.

Source: Jane Zhang, "Medicare Spending to Surge," Wall Street Journal, February 26, 2008.

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