This year, the government will spend $626 billion on the Medicare program as a whole — more than is spent on national defense. In fact, more is spent on Medicare than any government program other than Social Security. A combination of the aging of the population and rising healthcare costs will cause Medicare costs to explode even further in the coming decades.
There are about 77 million baby boomers in the U.S. By 2029, all of them will have turned 65, the age of Medicare eligibility. The boomers, combined with the disabled, will swell Medicare enrollment to over 88 million by 2040, a mere quarter century from now.
By that point Medicare will consume one out of every five dollars of the federal budget (minus interest payments on the debt) according to the Congressional Budget Office. All entitlements, including Medicare, Medicaid and Social Security, will consume almost 68 percent of the budget, leaving only one-third to pay for all other discretionary spending, including defense.
Topping it off, the federal deficit (including interest payments) will be about $1.8 trillion that year. To fill that gap without touching Medicare would require either severe, immediate, spending cuts; dramatic and economically unsustainable tax increases; or some undesirable combination of both. That means in reality, Congress will likely continue to make tweaks to Medicare aimed at restraining costs while avoiding the political blowback of any true reform that addresses the program’s underlying problems. But that will have consequences of its own.
As it has grown into one of the largest program’s in the federal budget, Medicare has enabled government to assert unprecedented control over the doctor-patient relationship. The process that led to this level of intrusiveness happened gradually, with doctors and patients losing their freedom little by little. But, more and more, doctors and patients are finding that Medicare won’t pay for treatments they want to try. Most worrisome, without serious reform, future cost pressures on Medicare will distort incentives and increasingly put doctors in conflict with their patients.