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PolitiFact: Claim about Medicare and deficit partly true

The statement

"Explosive growth in Medicare" is the reason federal deficit spending is predicted to top $1 trillion again after falling to $600 billion annually.

U.S. Rep. Sean Duffy, R-Wis., May 3

The ruling

The annual budget deficit for the 2013 fiscal year was $680 billion, according to an April report from the Congressional Budget Office, the nonpartisan scorekeeper.

That's down from $1.41 trillion in 2009, according to the White House Office of Management and Budget's website.

But projections are that yearly deficits will rise steadily to $998 billion by 2022 and slightly over $1 trillion the next two years.

There's no disagreement that Medicare costs, though growing more slowly than historical rates, will rise substantially in the coming decade as growing numbers of baby boomers become eligible for benefits at age 65.

But is Medicare growth "explosive"? And how big a driver will it be in future deficits?

It has been widely reported that recent growth in Medicare's per-beneficiary costs has slowed as overall health care cost inflation has slowed.

In fact, the CBO noted that, over most of the next 10 years, spending for Social Security and Medicare remains "fairly stable" as a share of GDP, before rising in the final few years of the 10-year projection period.

Still, Medicare costs are projected to rise faster than GDP growth in the future, said Melinda Buntin, chair of the Department of Health Policy at Vanderbilt University School of Medicine.

But other major forces not cited by Duffy will drive deficits.

Rising interest rates and increasing federal debt are expected to raise net interest payments from $227 billion in 2014 to $876 billion in 2024.

Another player in "health care costs" is Medicaid, the federal health program for low-income people. It will account for 2.1 percent of the economy in 2024, up from 1.7 percent in 2014, as some states expand coverage under the Affordable Care Act.

And Social Security is rising fast, as well, Steve Ellis, vice president of the nonpartisan Taxpayers for Common Sense, told us.

The CBO summed up the landscape by saying the substantial rise in the deficit will be mainly because of the aging population, rising health care costs, an expansion of federal subsidies for health insurance and growing interest payments on debt.

So what is the main driver in the deficit projections?

We turned to the Concord Coalition, a nonpartisan group that educates the public about the consequences of federal budget decisions.

Concord's policy director, Joshua Gordon, said that, on a percentage growth basis, Medicare and Social Security are in a virtual tie between now and the $1 trillion projected deficit in 2022. Their predicted growth rates in that period are within a percentage point.

Still, Social Security, the largest federal entitlement, contributes more to the deficit in actual dollar terms. Social Security is projected to grow by nearly $500 billion over 10 years compared with about $310 billion for net Medicare outlays.

We rate this claim Half True.

Dave Umhoefer, PolitiFact Wisconsin

Edited for print. Read the full version at PolitiFact.com.

PolitiFact: Claim about Medicare and deficit partly true 05/15/14 [Last modified: Friday, May 16, 2014 6:51pm]

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