Medicare significantly contributes to the federal budget deficit only through its general revenue financing under its Medicare Medical Insurance (Part B) program. Its outlays financed under its Medicare Hospital Insurance (Part A) or by individual premiums are features of the programs expenditures, but do not show up in federal budget calculations. There is much confusion between trust fund financing and general revenue financing: the former does not change the federal budget and the latter does. The program, as a whole, is an important part of U.S. public spending, and, no matter how the deficit is calculated, increases in outlays in all parts of Medicare are relevant to the macroeconomic and fiscal policy issues facing the nation. In considering fiscal policy levels of stimulus or its opposite, federal policymakers need to calculate the overall levels of spending and revenues, no matter what the source of funding. As the cost of health care continues to rise in the United States, Medicare spending inevitably increases as well. This is made even clearer by the aging of the baby boomer generation, which necessarily causes increases in the federal expenditures on health, specifically on Medicare. In 2009, federal spending on Medicare grew 7.9 percent. The increase in the proportion of the population in Medicare means declines in private insurance coverage. It is expected that the federal budget for Medicare will rise with the proportion of the population in the program, and that private insurance expenditures will fall.
Related FAQs
What is Sequestration?
How Did We Arrive at Sequestration?
What Does Sequestration Mean to Medicare?
What Part Did Medicare Play in the Fiscal Cliff Discussions?
What Happens to the Federal Budget Deficit under the Affordable Care Act (ACA)?
How Much Does Medicare Cost? How Much Is It Expected to Cost in the Future?
What Percentage of Federal Outlays Does Medicare Represent?
Why Is Medicare Spending Considered to Be Unsustainable?
How Much Do Medicare Beneficiaries Contribute on Average to Their Coverage During Their Working Life?
Why Is There So Much Discussion About the Solvency of Medicare?
