To ensure that the federal government’s borrowing capacity does not become exhausted within the next 25 to 50 years, the growth in federal health care spending must be reduced relative to baseline spending. I provide two scenarios that would provide additional borrowing capacity. These would require federal spending on Medicare, Medicaid, CHIP, and the insurance subsidies to be reduced by at least 7.5 percent of baseline spending, or 0.5 percent of the economy, over the 2025 to 2034 budget window.
Beginning structural reforms sooner rather than later will allow a path of continuous growth in the budget for health programs while avoiding much larger, drastic cuts in the future as well as problematic future tax increases, inflation, and higher interest rates.
