And the Federal Budget Will Be 100 Percent of GDP


In testimony before the Senate Budget Committee yesterday, Congressional Budget Office Director Peter Orszag said spending on Medicare and Medicaid will represent one-fifth of the gross domestic product in 2050 if it continues to grow at the same rate it has during the last four decades. That's "roughly the share of the economy now accounted for by the entire federal budget." While the aging of the population and the imminent retirement of the baby boomers will contribute to this dramatic increase, Orszag said, "the rate at which health care costs grow relative to income"—i.e., the fact that medical spending per patient has been rising about 2.5 percentage points faster than per capita GDP each year—"is the most important determinant of the long-term fiscal balance."

For this Orszag blamed, among other things, spending on new, more expensive treatments that are not always cost-effective, partly because doctors have a strong incentive to sell more services and patients have little reason to be cost-conscious. He also mentioned the various ways in which Americans fail to be as healthy as they could be, including smoking and overeating. But he implicitly conceded that the government would not necessarily save money if everyone were thin and smoke-free. "Although proposals that encourage more prevention and healthy living can help to promote better health outcomes," he said, "their effects on federal and total health spending are uncertain."

Why? Partly because living longer means more health care in old age (not to mention more demands on Social Security), so the net effect might actually be higher government spending. That appears to be the case with smoking, and it may be true of obesity as well. I have yet to see an analysis that looks at the total fiscal impact of eliminating obesity, as opposed to toting up the costs of treating diseases associated with high BMIs (many of which may actually be due to poor diet and/or lack of exercise, as opposed to excessive weight per se). I don't agree that every American has a duty to the state to eschew all risky habits because of their possible impact on the public treasury. But those who make this argument should at least be able to show that eliminating a particular risk factor would in fact improve the fiscal situation.