Health Care

Study #299 - Medicare: Past, Present and Future

Although Social Security reform has received considerable attention in recent years, Medicare is the far-bigger problem.  Medicare is growing at a faster rate and has an unfunded liability six times the size of Social Security. 

Medicare is also on a spending path that will be difficult to sustain without unprecedented boosts in revenues.  The reason: Per capita health care spending over the past half century has been rising at a rate two to three times faster than per capita gross domestic product (GDP).  If this trend continues, health care's share of the economy will grow considerably: 

• If the growth of real per capita health care spending exceeds the rate of growth of real per capita GDP by 2 percentage points, health care spending will consume almost 80 percent of GDP by 2075.
• Continuation of these past growth rates indefinitely would imply a five-fold increase in health care's share of the economy from present levels, crowding out the consumption of most other goods.