Federal funding for Medicare and Medicaid

With the exceptions of several years, Medicare and Medicaid funding had trended upward yearly for at least three decades. This is unsurprising given the expanding and aging US population, which implies that many Americans qualify for one or more of these programs. The boost in Medicare costs is the more predictable of the two, as it is driven by demographic trends that occur slowly and are primarily foreseeable. The burgeoning number of seniors has been brought about by a more extensive population base compounded by longer life expectancies, made possible by numerous advancements in the medical field. In turn, there have been medical developments that can treat or combat conditions that previously did not exist, adding to the expenditures. In short, funding for Medicare is increasing because it covers a more significant number of Americans for a more extended period and a more comprehensive array of ailments.

Conversely, Medicaid costs are responsive to changes in the broader economy and unemployment levels, making them less predictable. Medicaid qualification is connected to income levels, which fall as more employees lose their jobs during economic downturns. The subprime mortgage crises and related recession provide the most recent example of such a slide, with Medicaid expenditures spiking 24.6% in 2009 alone. In contrast, Medicaid expenditures increased only 10.1% in 2009, which indicates that Medicare spending is less sensitive to economic cycles. Overall, changes in Medicaid costs typically lag the ups and downs of the business cycle by approximately one year This is because hiring and firing are nontrivial business activities and, in turn, are only undertaken when the need is clear. In addition, layoffs and hiring are slow processes, which cannot be instantaneously implemented once the decision gets made.

Dire conditions brought on by the COVID-19 pandemic in 2020 resulted in many more people signing up for Medicaid, especially as factors like the brief shutdown of the economy and the resulting headwind effect of the lockdowns on some sectors left more people financially struggling to pay for necessary expenses like rent and insurance. With a need for these programs, the need for more funding became apparent, which resulted in a 14.9% boost in financing for these services in 2020. However, even as more people have enrolled in these programs, funding later decreased by 5.7% in 2021, stemming from shifts in the country as it recovers from the pandemic, which had shaken up Medicare outlays in the year. Even then so, funding rebounded in both 2022 and 2023 with the need for these services had become apparent while the economy recovers. However, funding allocated for such types of services are set to moderately expand in 2024 despite the presence of factors like a more divided legislature; however, such factors remained subject to change if successful efforts are taken in the period that will cut down funding. But, funding allocated is set to expand in 2025 following the passing of an election year and with a need for more support to help cover the expanding population of potential dependents on such programs will altogether push for more funding in the period.