REPORT: U.S. FEDERAL HEALTHCARE COSTS TO MORE THAN DOUBLE OVER NEXT 10 YEARS

In a development likely to fuel the argument that Medicare and Medicaid need major overhauls, the Congressional Budget Office (CBO) is predicting that these programs will grow by 124 percent over the next 10 years, outpacing economic growth two to one.

In its Jan. 24 report, "The Budget and Economic Outlook: Fiscal Years 2008 to 2017," the CBO concluded that while healthcare spending will jump by 124 percent, the gross domestic product is only expected to grow by 63 percent during that time. "Aging of the population and continuing increases in healthcare costs are expected to put considerable pressure on the budget in coming decades," the CBO said.

Economic growth alone is not enough to overcome the rise in healthcare spending, the CBO said. Instead, a drop in healthcare spending, an increase in taxes or some combination of the two is "necessary to promote the nation's long-term fiscal stability."

While the CBO did conclude that Medicare has played a role in recent deficit reductions, it is only a short-term improvement, the agency said. Medicare outlays for that program over the 2007-2016 period are nearly 8 percent lower in this baseline than in the CBO's August 2006 projections, the report said. That reduction is largely attributable to new estimates of per capita costs for all Medicare benefits and lower projections of the number of enrollees in the prescription drug benefit program.

"Those recent changes, however, do not significantly alter the upward trajectory of Medicare spending in the long term," the CBO said.

The report is available at mirror2.cbo.gov/ftpdocs/77xx/doc7731/01-24-BudgetOutlook.pdf.