Medicare Trustees Report Shows Lower Cost Growth Helping Medicare Financing

May 31st, 2013 at 12:03 pm

The trustees’ report on the financial outlook for Medicare and Social Security is due out in minutes, and I’ll link to my CBPP colleagues’ analysis later in the day.

But for now, check out this press release on the Medicare hospital insurance trust fund:

The Medicare Trustees today projected that the trust fund that finances Medicare’s hospital insurance coverage will remain solvent until 2026, two years beyond what was projected in last year’s report.

“The Medicare Hospital Insurance trust fund is projected to be solvent for longer, which is good news for beneficiaries,” said Marilyn Tavenner, Administrator of the Centers for Medicare & Medicaid Services (CMS). “Thanks to the Affordable Care Act, we are taking important steps to improve the delivery of care for seniors with Medicare. These reforms aim to reduce spending while improving the quality of care, and are an important down payment on solving Medicare’s long term financial issues.”

OK, there’s a little spin in there…and as I’ve stressed before, the years-of-solvency numbers jump around in ways that have more to do with underlying economy growth than structural reforms.  Nor are we out of the woods in terms of the long term cost challenges of health care in the US–and that’s true whether we’re talking private or public sector care…if anything, the public programs do a better job at controlling costs compared to the private side.

But that said, something important appears to be going on in the rate of health care spending, and some of that–no one knows how much–relates to changes in the health care delivery system of the type that are amped up in the Affordable Care Act.*

Medicare spending per beneficiary has grown quite slowly over the past few years and is projected to continue growing slowly over the next several years.  From 2010 to 2012, Medicare spending per beneficiary grew at 1.7 percent annually, more slowly than the average rate of growth in the Consumer Price Index, and substantially more slowly than the per capita rate of growth in the economy.  Thanks in part to the cost controls implemented in the Affordable Care Act, spending is projected to continue to grow slower than the overall economy for the next several years.

The benefits of this slower growth accrue to both tax payers and beneficiaries. For example, although the Part B premium for 2014 will not be determined until later this year, the preliminary estimate in the Report indicates that it will remain unchanged from the 2013 premium.

This is important news and it is good news.  It’s news that blows some wind in the sails of those of us arguing that the ACA will help boost coverage and control costs, it is the law of the land, and we should hurry up and implement it on schedule.  Those who are running around trying to kill “Obamacare” because it can’t possibly work never had much and they’ve got even less today.

*Over $700 billion in Medicare savings from the ACA also added about eight years of solvency to the Medicare HI trust fund.


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4 comments in reply to "Medicare Trustees Report Shows Lower Cost Growth Helping Medicare Financing"

  1. Perplexed says:

    That’s the beauty of reducing (or better yet eliminating) monopoly profits & other forms of rents, nothing changes with the product while the cost drops for everyone and it becomes more accessible to those at the margin! What a concept, maybe we should apply it everywhere? What’s the ratio of rents/GDP these days? It might be nice to know just how much we stand to gain by applying this concept everywhere. I wonder how Teddy Roosevelt figured this out without all of the DSGE models we have today? Amazing!

  2. jo6pac says:

    ACA is just a way for more welfare for corp. health care it should have been Medi-Care for everyone in the US. This is becoming a joke here in Calif. as they launch the site to handle this. The prices keep changing and we haven’t began yet.

  3. Dennis Byron says:

    Doubt if slower growth in Medicare spending than expected has anything to do with PPACA, since none of the PPACA components relevant to Medicare have kicked in yet. (The Part C cuts that were supposed to happen didn’t by Obama administration choice.)

    Don’t you think the real reason is that the true baby boomers (born 1946 and forward) are just now (as of 2011 and having their first full year effect in 2012) entering Medicare. They’re paying their $100 a month but making little relative cost demand on the system because they are relatively healthy. At the same time, sadly but inevitably, their parents — relatively sick and the true old people — have almost all passed away.

  4. Preventive Services says:

    That’s very good and I am very happy to know about this opportunity. That’s very helpful for everyone but mostly for those patients who are much conscious about cost. By lowering down the cost it will encourage the patients towards medication.
    This strategy will also encourage the other competitors to offer such a types offers and in this way patients will get the maximum benefits about medication.

    Thanks for sharing such a nice post.