June 16 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said rising government spending on health care in coming years will require tradeoffs in the form of cuts in other government programs, higher taxes or wider budget deficits.

``Taking on these challenges will be daunting,'' Bernanke said today at a health-care conference sponsored by the Senate Finance Committee in Washington. ``We should not expect a single set of reforms to address all concerns. Rather, an eclectic approach will probably be needed.''

Bernanke's remarks echo his prior comments that a failure to address the rising costs of retirement and medical benefits for an aging U.S. population would widen the federal deficit and cause other problems. He warned in 2007 that the U.S. government may face a ``fiscal crisis'' in coming decades and today discussed the implications of bigger deficits.

``It will have effects on interest rates, it will have effects on economic growth and on stability,'' Bernanke said in response to a question from Montana Senator Max Baucus, the panel's chairman. ``It's not just balancing the federal budget. It's really a much broader question of the stability and strength of our economy over a long period of time.''

Bernanke has refrained from endorsing specific proposals or legislation on taxes and spending, unlike his predecessor Alan Greenspan.

Increasing Proportion

``To continue limiting the effects of rising medical costs on household budgets, the government may have to absorb an increasing proportion of the nation's total bill for health care, putting even greater pressure on government budgets than official projections suggest,'' Bernanke said in the speech.

Bernanke outlined arguments for and against several potential changes to the health-care system, while saying the eventual choices are better ``left to the public and their elected representatives.''

Bernanke didn't comment on the outlook for interest rates or the U.S. economy. Fed policy makers meet June 24-25 in Washington, and investors and economists project the central bank will leave its main rate unchanged, pausing after seven cuts totaling 3.25 percentage points.

Venturing outside the Fed's traditional areas of expertise, Bernanke, a former Princeton University economics professor, said three main issues for health care are access, quality and cost.

Without endorsing specific changes, Bernanke said policy makers will grapple with issues such as mandating enrollment in health insurance and using public funds to provide subsidies to low-income citizens or the self-employed.

`Improving Access'

Also, ``improving access and quality may increase rather than reduce total costs,'' he said.

``From the economist's perspective, the question of whether we are spending too much on health care cannot ultimately be answered by looking at total expenditures'' relative to economic growth or the federal budget, he said. ``Rather, the question, whatever we spend, is whether we are getting our money's worth.''

Comparing the Fed's interest-rate setting process with health-care policy, Bernanke said that because the central bank must weigh both the short- and long-term impact of its decisions, ``we're better off if we keep that somewhat independent of the short-term political process.''

Yet for health-care changes, Bernanke said he's a ``little bit skeptical that you could keep politics completely out'' of the process.

To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net

Last Updated: June 16, 2008 11:21 EDT