Rising Medicaid Spending to Bankrupt States, Federal Government

Wednesday, April 15, 2009 by: David Gutierrez, staff writer
Tags: Medicaid, health news, Natural News

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(NaturalNews) Medicaid costs are expected to skyrocket in coming years, far outstripping the rate of economic growth and placing an increasing financial burden on state and federal governments, according to the first actuarial review ever conducted of the program.

"This report should serve as an urgent reminder that the current path of Medicaid spending is unsustainable for both federal and state governments," said Health and Human Services Secretary Mike Leavitt. "If nothing is done to rein in these costs, access to health care for the nation's most vulnerable citizens could be threatened."

Medicaid is a joint federal-state program to provide health care for people with low incomes. According to the report, it accounted for 7 percent of the federal budget in 2007. By 2013, it is expected to account for 8.4 percent of all federal spending.

Medicaid spending has grown at an astonishing rate since the program began in 1966. By 1970, Medicaid accounted for 0.4 percent of the U.S. gross domestic product (GDP). This had increased to 0.9 percent by 1980, 1.2 percent by 1990 and 2.0 percent by 2000, and had reached 2.3 percent by 2007. According to the new report, Medicaid will account for 3 percent of GDP by 2017.

The rate of Medicaid spending increase from 2007 to 2008 is estimated at 7.3 percent, and is expected to average 7.9 percent annually for the next ten years. In contrast, the economy is only expected to grow at a 4.8 percent annual rate.

An absolute terms, current yearly Medicaid spending totals $339 billion. It is expected to reach $674 billion by 2017.

"High and increasing Medicaid spending clearly leaves states less able to fund other state priorities," said acting Centers for Medicare and Medicaid Services Administrator Kerry Weems. "This new financial report confirms that America's health care system faces significant fiscal challenges."

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