Tuesday, July 18, 2017

Sustainable Medicaid spending

Since the government is working on several different versions of a healthcare bill for the USA, it is not easy to know what will be legislated and how those changes will affect us. What we can know is that some folks will claim the sky will fall, and maybe it will. But since the sky has never fallen in my lifetime, I thought I would look backward in this post. This continues my wail about government addiction to debt. Lost in the preoccupation with the future is what happened to government spending and debt in the recent past. We don't really hate poor people. But we do have to think harder about how we accumulate debt. So here goes.

I got a little wild and crazy with the data. It makes me want to gulp JD and sing Blue Suede Shoes (Carl Perkins version). At the bottom of this post is one huge table with three parts.
     Part 1: Amounts for various categories of government budgeting in billions of dollars for the years 2006, 2011, 2016, 2021, and 2026. The data for 2021 and 2026 were given to me by Putin. Just kidding. They are estimates of the future based on past legislation. That is, if we do not change any legislation, that is what the Congressional Budget Office thinks will happen to spending in the future.
     Part 2: The changes, in billions of dollars, between those five-year time periods.
     Part 3: The percent changes between those time periods. The last two lines 06-16 and 16-26 summarize a comparison of 10 years past to 10 years in the future.

Let's start with the last column which shows federal government revenues. The government collected around $2.4 trillion in 2006. By 2016, it was raking in $3.3 trillion, an increase of about 36%. That seems reasonable. With no legislative changes, this would increase to almost $5 trillion in 2026 or 51% higher than in 2016.

I started with revenues because they are a benchmark for how much spending could grow without increasing the government debt. A 51% increase in the next 10 years seems reasonable. But then, if you are paying that 51% increase, you might want to argue about that. One thing we learn is that the rate of growth of federal taxes will be much higher (the rise from 36% to 51% is a 42% increase) in the future compared to the past. Don't say a word to me about austerity!

With that benchmark, we can now look at spending. Let's start with Medicaid.  Medicaid was a mere $181 billion in 2006, rising to $369 billion in 2016. So in the past 10 years, Medicaid spending rose by 104%. Review: Taxes rose by 36%; Medicaid by 104%. Medicaid will rise another 78% from 2016 to 2026. So whether we look backward or forward, Medicaid is one of the stars of government spending -- rising much faster than overall revenues.

If we want to be concerned about deficient government spending, look at the Income Security (Part of Mandatory Spending) and Discretionary changes. These components contain a lot of government programs*. After rising by 52% in the past 10 years, Income Security is projected to grow by only 21% in the next 10. Discretionary spending rose by 17% in the past and could rise by 24% in the future. Laggards!

Not to be prejudiced against Social Security and Medicare, you can see that those programs are doing their respective parts to bankrupt our country. After growing by 67%, SS will grow another 84%; Medicare will leap by 101% after growing by 84% previously.

The sad conclusion is this: As a centrist I support using the government to help people. But as a centrist, I also believe the best way to help people in a sustainable way is to not go bankrupt. These numbers help us see that we are on our way to trouble. These numbers do not incorporate any proposed increases in spending on military and infrastructure and do not incorporate any budgetary changes attendant to reforming healthcare or taxes.

These numbers suggest that Medicaid is among several key spending areas that must be addressed. It is not our national purpose to harm or kill the old and sick. But it is in our national interest to find ways to correct a problem in such a way that we can sustain programs that help the elderly, the sick and others. If ideologues scream murderer every time a program's growth is slowed -- then we will have to deal with a world in which none of the government works.

*Discretionary Spending includes spending on such items as education, scientific research, infrastructure, parks, environmental protection, some low-income assistance, public health and more.  


Social  Income  Discre- Rev-
Billions  Security Medicare Medicaid Security tionary enues
2006 544 377 181 2001017 2407
2011 725 560 275 404 1347 2303
2016 910 692 368 304 1185 3268
2021 1184 904 479 320 1306 4011
2026 1674 1390 655 369 1464 4948
Social  Income  Discre- Rev-
Change Security Medicare Medicaid Security tionary enues
6 to 11 181 183 94 204 330 -104
11 to 16 185 133 93 -100 -162 965
16 to 21 274 212 111 16 121 743
21 to 26 490 486 176 49 158 937
Percent Social  Income  Discre- Rev-
Change Security Medicare Medicaid Security tionary enues
6 to 11 33 49 52 102 32 -4
11 to 16 26 24 34 -25 -12 42
16 to 21 30 31 30 5 10 23
21 to 26 41 54 37 15 12 23
 6 to 16 67 84 104 52 17 36
16 to 26 84 101 78 21 24 51


  1. Very good analysis! One savior for Medicaid is old
    sick folks transfer into Medicare. We do have a deficit problem, now we have to wait for a crisis. Kenny Kaz

    1. Thanks Ken, sometimes a crisis is the only way to solve a debt crisis. Sad to say because it would be a lot easier if we didn't have to hit someone between the eyes with a 2x4 just to get their attention.

  2. G’day, LSD. As the Animals sang, “We gotta get out of this place, if it's the last thing we ever do, we gotta get out of this place, 'cause girl, there's a better life for me and you.” I don’t see any way we’re gunna get to that better life of manageable debt and reduced and prioritized spending—the recent healthcare debacle I think puts icing on the cake of hope that Rs can shepherd legislation that will curtail govomit growth. In past blogs I stated the R trifecta—WH, House, Senate—would at last be the opportunity needed to put the country back on the “right” course. You demurred—your crystal ball apparently was less opaque than mine. Jagger sang, “You can't always get what you want, but if you try sometimes well, you just might find, you just might find, you get what you need.” Looking at the current state of U.S. political affairs, I got what I wanted but what I got I certainly don’t need.

    Coach Nick would describe the current Rs as a bunch of gutless wonders. They had the opportunity to score but didn’t. No championship for them.

    1. Cheese and Crackers.That was another thing Coach Nick would say. I find your contrition about the trifecta admirable and its taken a lot of self control on my part to not say nah nah nah. So I won't. I guess I should end with the words to the song I love to sing...I've got sunshine on a cloudy day. Or may something about lemons and lemonade. Cheers Dear Tuna, Larry