Medicaid's Soaring Cost - Time to Step on the Brakes

Abstract

Current trends and policies imply unsustainable growth in federal Medicaid outlays. Making conservative assumptions about future growth in Medicaid enrollment and spending per beneficiary, this paper estimates that the present value of federal Medicaid outlays over the next 100 years will take up 24 percent of the present value of federal general revenues and 3.7 percent of the present value of GDP calculated over the same period. If current policies and trends are maintained, federal Medicaid outlays will take up 36 percent of lifetime federal general revenue taxes for males born in 2025 and 69 percent for females born in that year. For females born after 2050, almost all of their lifetime federal nonpayroll taxes will be consumed by their lifetime Medicaid benefits. Higher tax rates cannot plausibly cover this growing spending commitment. Limiting Medicaid spending growth is, thus, an essential component of putting the federal budget on a sustainable course without imposing crushing tax burdens on younger and future generations, thereby harming the prospects for future economic growth.