Alarming Forecast

Larry Kotlikoff and his colleagues have completed a ten country study that estimates future health care spending. Among the results: government at all levels in the United States currently spends about 7.2 percent of GDP on health care, mainly on Medicare and Medicaid. Yet, if benefits expand at the rate of the past 30 years and if the population ages the way demographers predict, spending will equal one-third of national income by mid-century, when today’s college students reach the retirement age. If that is not immediately alarming, note that one-third of GDP is about equal to all government spending for all purposes today. If private spending on health care keeps up with public spending, the nation will devote about two-thirds of national income to health care by mid-century – an amount roughly equal to the total consumption of all goods and services!

So in the public sphere, health care is on a course to crowd out every other government program – from education and roads and bridges to Social Security and national defense. And for the economy as a whole, health care is on a course to crowd out every other form of consumption, including food, clothing, housing, etc.

View the full study here.

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