20 Percent by 2020

Here’s a number for you: by 2020, health care costs will account for one-fifth of America’s GDP. This is according to a report published today by the Centers for Medicare and Medicaid Services (CMS). The report projects an annual growth rate of 5.8 percent in medical spending over the next decade, with the government’s (translation: taxpayers’) share of the burden rising from about 45 to 49 percent. By 2020, health care spending in the U.S. will reach $4.6 trillion. Although the report is anything but cheerful, many economists believe it is still overly optimistic. Health spending grew at a historic low in 2010, but that was simply an aftershock of the recession. The Affordable Care Act will create a whole new world of health care spending, but the report hides this fact beneath the most convenient caveats. The report assumes, for example, that physician payments will be cut by almost 30 percent by next year, even though Congress has blocked similar cuts for the past 10 years. Joseph Antos, a health policy expert at the American Enterprise Institute, put it bluntly:

You can’t draw the conclusion that health reform is going to extend coverage to tens of millions of people and spending is going to remain essentially the same. I wish it were true, but it just can’t be. This depends on everything working perfectly, including some politically very painful cuts to Medicare.

Believe the White House if you want, but it’s hard to argue with Mr. Antos. His criticisms cut right to the core of why it has been so difficult to cut spending in recent years. They also demonstrate why we should end the posturing and raise the debt ceiling, since these problems aren’t going to be solved in the next five days. But they’re not going to disappear anytime soon, either. We’ve dug ourselves into a hole, and, with August 2 looming ahead, we’re worried that we might be trapped. There’s a very simple lesson to be learned here (hint: it doesn’t involve more digging).

—Thomas L. Hauch