Good News About Medicare and the Budget

The New York Times recently posted a fascinating chart, derived from the nonpartisan Congressional Budget Office’s (CBO) data, which shows that the cost of Medicare is rising more slowly than analysts had expected. In 2006, the CBO projected that annual Medicare outlays per person would rise from a bit more than $9,000 to about $15,000 by 2016.

In a new report, the CBO predicted that the actual outlays per person in 2016 will be close to $11,000. That’s a big difference. We are talking about an increase of about 20 percent in spending per person as opposed to the initial prediction of more than 60 percent. (The figures are all inflation-adjusted.) And the CBO reckons that the slowdown in spending growth will continue. Its forecast for the overall Medicare budget in 2019 is $95 billion lower than it was four years ago.

“That sum is greater than the government is expected to spend that year on unemployment insurance, welfare, and Amtrak-combined,” the Times‘ Margot Sanger-Katz and Kevin Quealy point out. “It’s equal to about one-fifth of the expected Pentagon budget in 2019.” In the world of health care economics, there’s a vigorous debate going on about why the rate of spending growth has slowed so dramatically.

Some analysts attribute much of that to the Great Recession and its aftermath, which reduced the demand for all sorts of goods and services, including medical treatments. The slowdown in spending growth started around 2007, so it coincided with the onset of the recession. But it has persisted since the recession ended in 2009, which suggests that something else might be going on.

Source/more: The New Yorker