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Will Medical Care Strangle or Save the Federal Budget?

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  • David M. Cutler

Abstract

Forecasts of the federal budget depend greatly on trends in medical spending. Since 1970, medical spending has nearly tripled as a share of gross domestic product (GDP). However, spending growth has barely exceeded GDP growth since 2010. This difference in growth rates makes forecasting spending difficult. I present scenarios for future spending derived from considering the sources of spending increase, ranging from rapid increases in new, expensive treatments to a reduction in spending due to cost-reducing technology. Even modest increases in spending relative to GDP are likely to overwhelm the federal government’s ability to pay for medical care using current tax instruments.

Suggested Citation

  • David M. Cutler, 2026. "Will Medical Care Strangle or Save the Federal Budget?," NBER Working Papers 35922, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:35922
    Note: AG EH PE
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    More about this item

    JEL classification:

    • H69 - Public Economics - - National Budget, Deficit, and Debt - - - Other
    • I1 - Health, Education, and Welfare - - Health

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