Annual Medicare, Medicaid spending in California tops $100 billion

Published: Tuesday, Feb. 26, 2013 - 5:35 pm
Last Modified: Monday, Mar. 3, 2014 - 2:11 pm

Government health spending in California now exceeds the size of the entire state general fund budget.

The federal and state government spent $46 billion on Medicaid (Medi-Cal), a health care program for the poor, and the federal government spent $59 billion on Medicare, a health care program for the elderly, in 2011, according to recent estimates from the U.S. Bureau of Economic Analysis. That's roughly $2,800 per California resident.

Medicare and Medicaid spending in California has doubled in the last 15 years, even after adjusting for inflation.

Rising health care costs are a key driver of the nation's budget deficit. The nonpartisan Congressional Budget Office estimates that Medicare and Medicaid spending will rise from 5 percent of the nation's gross domestic product today to 10 percent of GDP by 2037. In other words, one of every ten dollars produced by the American economy could soon pay for Medicare and Medicaid.

The government spent six times as much on Medicare and Medicaid in 2011 as it did on unemployment benefits; 16 times as much on Medicare and Medicaid as on food stamps; and about 65 percent more on Medicare and Medicaid than on Social Security retirement benefits, according to the Bureau of Economic Analysis.

Payroll taxes cover 36 percent of the costs of Medicare. Premiums paid by beneficiaries cover another 12 percent. The remaining amount is paid by the federal government, often through borrowing, according to the Congressional Budget Office.

Both federal and state governments pick up the costs for Medicaid. California pays about $16 billion a year from its general fund toward its program, called Medi-Cal. Spending on the program has slowed a little as the economy improves and state cuts take effect. About one of every five residents in the state are enrolled in Medi-Cal.

This chart shows growth in Medicare and Medicaid spending in California, adjusted for inflation into current dollars, over the past 40 years.

Adjusted for inflation into current dollars
Source: U.S. Bureau of Economic Analysis estimates

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Read more articles by Phillip Reese



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