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CBO report: Feds can't sustain Medicare spending

Government office predicts that Medicare trends will force tax increases, federal spending reduction

Due to the increase in life expectancy and baby-boomers reaching the age of 65, Medicare spending will likely skyrocket so much that the federal government will have to either reduce spending or increase taxes, according to a new Congressional Budget Office (CBO) report.

The report, which outlined a study that used data from the Master Beneficiary Summary File from 1999 to 2012, projected that the U.S. population age 65 or older will grow from almost 15 percent in 2015 to more than 21 percent by 2040. Currently, the population that is 95 years old is almost 100 percent dependent on Medicare, and with human life expectancy increasing each year, the number of those in the population living longer will increase. However, the increase in life expectancy, according to the report, is not the lone reason behind the shift in age.

"The increase in life expectancy has been significant in recent decades, but that increase alone cannot explain the shift in the age for which spending per beneficiary was highest," the CBO said. "Because Medicare spending tends to increase in the last year of life, increases in life expectancy or reductions in age-specific mortality rates could affect the age profile of Medicare spending per beneficiary."

Additionally, as members of the baby boom generation, which is defined as Americans who were born between 1946 and 1964, reach 65 years old and become Medicare eligible, the effects of the aging of the population on future Medicare spending has become a key policy concern, because of both the increase in beneficiary numbers as well as changes in the age distribution of beneficiaries.

A recent brief from the Commonwealth Fund, however, argues that such predictions are "an inexact science, at best," and says policymakers should instead focus on containing the program's costs today

To learn more:
- read the CBO report (.pdf)

Related Article:
The impact of policy changes, long-term forecasting on Medicare spending
Medicare growth strains healthcare system
Medicare trust fund to run out by 2030, trustees say