Moody’s warns of rising costs for social programs

Mandatory spending on social programs, including healthcare and Social Security, could weaken the nation’s long-term fiscal outlook, credit rater Moody’s Investors Service warned Wednesday.

The federal deficit is expected to remain stable within the next few years, but Moody’s suggested rising healthcare spending could “put pressure” on the nation’s credit.

“The main drivers of the expected growth in healthcare and Social Security spending are the rate of inflation in cost of healthcare services and demand for those services due to the aging of the population,” Moody’s said. 

{mosads}If policies remain the same, the federal debt-to-gross domestic product (GDP) ratio will rise to 88 percent by 2030. The ratio currently stands at 75 percent.

“Such an increasing trend likely would bring negative pressure on the US’s credit profile,” Moody’s added.

The credit investor, however, said policymakers could create savings by expanding the Social Security tax base, by modifying healthcare insurance subsidies and revenue, and by increasing premiums and co-payments for Medicare recipients. 

Last month, Moody’s said the U.S. will maintain its “AAA” credit rating, the highest possible score, for at least a few more years due to dropping budget deficits. 

It noted at the time, however, that the rise in healthcare costs could negatively affect the nation’s credit rating.