Federal health care spending continues to weaken the “government’s long-term fiscal outlook,” according to a new report by the Government Accountability Office (GAO).
“The federal government’s fiscal outlook has improved since GAO’s last report, largely due to provisions in the Budget Control Act of 2011,” the report says, while warning that “rising health care costs and the aging of the U.S. population continue to create budgetary pressure.”
The report pointed to rising costs of Social Security and Medicare as the primary drivers of public debt. It allowed that Obamacare, in the best case scenario, might cut health care spending costs through measures included in the bill such as “reductions in physician payment rates,” but the report authors expressed skepticism about the actual effectiveness of Obamacare in lowering health care costs.
“The Trustees, CBO, and the CMS Actuary have expressed concerns about the effective implementation of certain cost-control measures over the long-term,” the report says, observing that “spending on health care grows much more rapidly under these more pessimistic assumptions.”
President Obama and his Health and Human Services Department recently acknowledged that the CLASS Act, a major aspect of Obamacare’s touted health care cost reduction, would not be effective and so will not be implemented.
Figure One of the report, pictured above, shows that even the baseline (optimistic) projection has public debt approaching 160 percent of GDP by 2060. The more “pessimistic” projections mentioned the report put public debt at almost 200 percent of GDP by 2040.
The GAO office notes that “the economic downturn,” in conjunction with increased federal spending caused “a rapid build-op in federal debt held by the public — increasing from roughly 36 percent of GDP at the end of 2007 to roughly 62 percent at the end of 2010.”
GAO envisioned a possible scenario in which public debt “exceeds the post-World War II high of 109 percent by 2027,” absent further deficit reduction. “Our simulations show that the Budget Control Act of 2011 will help reduce deficits,” the report concluded. “However, the longer-term fiscal challenge remains.”
GAO Report on the Federal Government’s Long-Term Fiscal Outlook- Fall 2011 Update
