Health Care Spending: Public Payers Face Burden of Entitlement Program Growth, While All Payers Face Rising Prices and Increasing Use of Services

GAO testified about the challenges involved in financing health care. GAO has been particularly concerned about the federal government's long-term fiscal sustainability and the contribution of health care spending to this troubling picture. For the past several years, we have consistently reported that in just a few decades, the government will face a serious fiscal imbalance driven by known demographic trends and escalating health care cost growth. Over the next several decades, growth in spending on federal retirement and health entitlements will encumber an escalating share of the government's resources. These entitlement programs primarily include Social Security, which provides, among other things, retirement income to individuals aged 62 and older; Medicare, which provides health care coverage primarily for individuals 65 and older; and Medicaid, which is a joint federal-state program providing health care and long-term care for low-income individuals. Congress's concern about the challenges involved in financing health care is consistent with the fact that certain spending pressures faced by Medicare and Medicaid are faced by all health care payers, including the Departments of Veterans Affairs (VA) and Defense, as well as private payers of health care. To provide an overview of the situation, GAO discussed (1) the long-term outlook for the federal budget and implications for the national economy, (2) health care spending increases system-wide and drivers of spending growth, and (3) cost containment challenges health care payers face now and in the future. This testimony is based largely on issued GAO work and relevant literature on health care spending. In February 2007, we updated prior work by including more recent data from GAO's budget simulation model, the Centers for Medicare & Medicaid Services, and the U.S. Census Bureau.