An otherwise mixed report yesterday from the Congressional Budget Office (CBO) offered some good news about what was supposed to be the most intractable aspect of federal deficit spending. For the sixth consecutive year, the CBO lowered its projections for the cost of Medicare, because of slower growth (or even outright decline) in expenditure per participant. Since 2010, when the Affordable Care Act was enacted, estimates for the decade through 2020 are down by some $700 billion.
In recent years three distinct federal deficits have raised serious concern about our nation’s future. The first, the budget deficit, is manageable – the last four Clinton budgets, before the Bush tax cuts, the War on Terror, and the Great Recession, were balanced. The second, the projected Social Security deficit, is hardly comparable to the pension crises faced by some European nations; pillowed by its trust fund, our system can be stabilized by further tweaks similar to those already made.
Medicare appeared to be the greatest threat because adverse demographic trends (the aging of the Baby Boom generation) were coupled with a seemingly inexorable rise in health care costs, at rates far above any calculation of cost of living. And the most widely touted remedy, raising the age of eligibility, would cut government spending by shifting the burden to employers. New hope on Medicare costs should help us face up to the long-term fiscal challenges that our country confronts.