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Melinda Gates: Medicare and Medicaid could destabilize the economy

Brian Sozzi
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At some point the U.S. government will have to find solutions to fix the spiraling costs to fund health care entitlements such as Medicare and Medicaid.

The proverbial can’t be kicked down the road forever, especially with costs for these programs poised to skyrocket as the Baby Boomers age. If something isn’t done to address the structural problems, the U.S. economy could take quite the hit says one prominent health care advocate.

“I think they [Medicare and Medicaid] could be [destabilizing to the economy],” Melinda Gates, philanthropist, new author of ‘The Moment of Lift’ and co-chair of the Bill & Melinda Gates Foundation, tells Yahoo Finance. “We know that we have the highest health care costs in the world. And we have a phenomenal health care system. However, the costs are disproportionate in terms of our GDP right now.”

Gates is arguably better at understanding the health care debate than any politician in office or out office. Her unmatched wealth and leadership atop the Bill & Melinda Gates Foundation has sent her across the world to help improve the health and education systems of impoverished villages.

Gates has championed the use of contraceptives to assist in proper family planning. She and husband Bill —Microsoft’s founder — have also beaten the drum on the need to vaccinate.

Both Democrats and Republicans need to give the Gates’ a call if they haven’t already. Because in short, it’s getting uglier out there in health care cost land.

Medicare costs skyrocketing

Medicare costs alone are expected to grow to 5.9% of U.S. GDP by 2038 from 3.7% in 2018, according to the Social Security Administration (SSA). In that scenario, the government will likely have to raise taxes a good bit to fund the programs even if the economy is doing well. Should the economy enter a recession (always likely), the higher costs for the health care programs could wallop economic output.

Meanwhile, new research from Gallup says seniors have withdrawn $22 billion from their long-term savings to fund health care costs.

That’s $22 billion that could be used for more productive means instead of paying higher costs for basic services.

“Notwithstanding the assumption of a substantial slowdown of per capita health expenditure growth, the projections indicate that Medicare still faces a substantial financial shortfall that will need to be addressed with further legislation,” warns the SSA’s trustees in a recent report. “Such legislation should be enacted sooner rather than later to minimize the impact on beneficiaries, providers, and taxpayers.”

Brian Sozzi is an editor-at-large at Yahoo Finance. Follow him on Twitter@BrianSozzi

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