Forecasts of Future Spending

CBO: Long-term Outlook for Federal Spending

Health care costs will increase from 6 percent to 8 percent of GDP by 2043

The Congressional Budget Office Long-term Budget Outlook released in June 2023 projects the trends in the major federal spending programs, based on current program rules, and projects the likely spending out to 2050.

The outlook is fairly clear. Social Security will expand from a spending level of 5 percent of GDP today to about 6 percent by 2033.

But Medicare and Medicaid, the two big federal health care programs, will expand from 6 percent GDP at present to 8 percent of GDP by 2043.

The CBO assumes that other programs, except interest on the national debt, will decrease due to the pressure of health care spending from the current 10 percent of GDP to 8 percent of GDP by 2046. Interest expense will increase from 2.5 percent of GDP to 4 percent of GDP by 2037.

Medicare Trustees Report

Medicare will cost about 6 percent of GDP by the middle of the 21st century.

Every year the Center for Medicare & Medicaid Services publishes a Medicare Trustees Report. The latest report was published in March 2023.

The 2023 trustees report shows that Medicare will cost in 2080 about 2.10 percent of GDP for the Part A Hospital Insurance, 3.57 percent of GDP for the Part B Supplementary Medical Insurance and 0.66 percent of GDP for the Part D drug benefit. (In the Trustees Report Part C, “Medicare Advantage,” is not broken out of Part A and Part B).

Right now Medicare costs about 3.72 percent of GDP. But costs are expected to increase, breaching 4 percent of GDP by 2025 and 5 percent of GDP by 2031, and 6 percent of GDP by 2046. By 2080 Medicare is expected to max out at about 6.3 percent of GDP in the 2070s.

Social Security OASDI Trustees Report

Social Security will cost over 6 percent of GDP by 2037.

Every year the Social Security Administration publishes an OASDI Trustees Report. The latest report was published in March 2023.

The 2023 trustees report shows that Social Security’s two main programs, the Old Age and Survivor Insurance (OASI) program and the Disability Insurance (DI) program cost 4.89 percent of GDP between them in 2022. The OASI program cost 4.31 percent of GDP and the DI program cost 0.58 percent of GDP.

Over the years since the Crash of 2008 Social Security costs have increased sharply as a percent of GDP. OASI has gone from 3.38 percent of GDP in 2007 to 4.03 percent of GDP in 2013; DI has gone from 0.67 percent of GDP in 2007 to a peak of 0.86 percent of GDP in 2012.

In the medium term Social Security costs are forecast to increase to 6 percent of GDP by 2040 and then max out at about 6.3 percent of GDP in the 2070s. OASI will be the main driver, hitting 5 percent of GDP in 2028 and increasing to 5.7 percent of GDP in 2075. DI costs are expected to decline slowly from 0.83 percent of GDP in 2014 to 0.60 percent of GDP in the mid 2030s and increasing to 0.69 percent GDP in the 2050s.