NCPA - National Center for Policy Analysis

Medicare, Medicaid Spending Continue to Rise

August 4, 2011

The costs of the government's big health care programs are soaring again, says USA Today.

  • Medicare and Medicaid spending rose 10 percent in the second quarter from a year earlier to a combined annual rate of almost $992 billion, according to new data from the Bureau of Economic Analysis (BEA).
  • Medicare and Medicaid paid a record 57.5 percent of patient bills for hospital, doctors, drugs and other care in the last quarter, up from 49.3 percent in 2005.
  • The two programs are on track to rise $90 billion in 2011 and crack the $1 trillion milestone for the first time.

The jump in health care spending is the biggest since the Medicare prescription drug benefit was added five years ago and ends a brief lull in the spending increases that occurred during the economic downturn.

The debt limit and spending package approved by Congress and President Obama doesn't restrict the costs of Medicare, Medicaid and other entitlement programs.  The rapidly escalating costs of the health care programs will challenge lawmakers seeking to rein in federal spending in the future, especially in 2014, when coverage expands to people who are uninsured now.

Driving entitlement costs in 2011:

  • Medicare. The insurance program for the elderly and disabled grew 8.3 percent from a year earlier to a $554 billion annual rate in the past three months, the BEA reports. Enrollment will grow from 49 million today to 60 million in 2018.
  • Medicaid. The federal-state cost of medical care for the poor and nursing homes for the elderly rose 12.3 percent to a $438 billion annual rate. The expiration of the stimulus law will cut the federal share of the program from about 70 percent to 60 percent in the last half of this year, shifting about $40 billion in annual costs back to the states.

Source: Dennis Cauchon, "Medicare, Medicaid Tab Keeps Growing," USA Today, August 3, 2011.

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