Health costs are the real deficit threat

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Peter R. Orszag
Director,White House Office of Management and Budget
For The Wall Street Journal

This week confirmed two important facts - that health-care costs are the key to our fiscal future, and that even doctors and hospitals agree that substantial efficiency improvements are possible in how medicine is practiced.

The numbers speak for themselves. The Medicare and Social Security trustees' reports released this week show that health-care costs drive our long-term entitlement problem. An example illustrates the point: If costs per enrollee in Medicare and Medicaid grow at the same rate over the next four decades as they have over the past four, those two programs will increase from 5% of GDP today to 20% by 2050. Despite the attention often paid to Social Security, spending on that program rises much more modestly - from 5% to 6% of GDP - over the same time period. Over the long run, the deficit impact of every other fiscal policy variable is swamped by the impact of health-care costs.

Spiraling health-care costs are not just some future abstraction, however. Right now, families across America who have health insurance are seeing their take-home pay reduced and their household budgets strained by high costs and spiraling premiums. State and local governments also are feeling this pinch. And the growing weight of health costs on state budgets translates into an inability to make investments in areas such as education, hindering our overall economic growth.

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