Health Care Expenditures Contribute to Increase in Federal Spending

The federal government currently is spending 20.8 cents of every dollar the economy produces, an increase from 18.5 cents per dollar in 2001 that is partly attributable to higher spending on Medicare, Medicaid and veterans health care, USA Today reports.

The increase marks the fastest growth in federal spending under one administration since Franklin Roosevelt was president from 1933 to 1945. The House this week is set to debate a $2.8 trillion budget for 2007, which projects an additional $3 trillion in debt in the next five years. USA Today examines some of the contributors to the growth in spending.

Medicare spending has increased because of this year's implementation of the prescription drug benefit, which is estimated to cost an average of $80 billion per year for the next 10 years and add about 20% to Medicare's annual costs (Wolf [1], USA Today, 4/3).

Spending on health care for veterans has increased due to the addition of hospitals, clinics and nursing homes to the system. VA spending also has increased because veterans from the Iraq and Afghanistan wars who came from the National Guard and Reserves are eligible for two years of health care services. In addition, larger numbers of veterans from previous conflicts have signed up for disability and pensions.

Meanwhile, Medicaid spending has increased 49% over the past five years. This year, Congress cut $39 billion from benefits programs over five years (Wolf [2], USA Today, 4/3).

However, there are "no signs that the trend" of higher spending "is about to turn around," according to USA Today. Douglas Holtz-Eakin, former director of the Congressional Budget Office, said, "Budgeting is about making choices, and this period is one that shows a complete absence of that." The Bush administration says it has led efforts to cut Social Security, Medicare and Medicaid (Wolf [1], USA Today, 4/3).