Will Medical Care Strangle or Save the Federal Budget?

David Cutler

No 35922, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: H69 I1 (search for similar items in EconPapers)
Date: 2026-10
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