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February 06, 2013

Slow Health Care Spending has Already Substantially Reduced the Deficit

Posted in: healthcare

As I pointed out last week, there has now been a three year trend of Medicare per beneficiary spending growing at a very slow rate. These three years of slow growth have already produce substantial reductions in the deficit, according to the Congressional Budget Office’s new budget outlook:

Medicaid and Medicare. In recent years, health care spending has grown much more slowly both nationally and for federal programs than historical rates would have indicated. (For example, in 2012, federal spending for Medicare and Medicaid was about 5 percent below the amount that CBO had projected in March 2010.) In response to that slowdown, over the past several years, CBO has made a series of downward technical adjustments to its projections of spending for Medicaid and Medicare. From the March 2010 baseline to the current baseline, such technical revisions have lowered estimates of federal spending for the two programs in 2020 by about $200 billion—by $126 billion for Medicare and by $78 billion for Medicaid, or by roughly 15 percent for each program.

For three years now Medicare spending has grown at a rate significantly slower than what the CBO projected.  As a result, the deficit outlook has improved by roughly $200 billion.

It is possible this slow growth will end soon, but it is also possible that this trend could continue. If it did, that would mean the CBO is still overestimating future spending on the programs. If this trend continues for several more years it would improve the budget outlook by several hundred billion more.

I, of course, wait with bated breath for the deficit hawks to acknowledge this improvement and change their deficit reduction demand accordingly. The slow rate of growth has already  reduced the deficit by even more than raising the Medicare age from 65 to 67 would have done.

Photo by TimmyGUNZ under Creative Commons license.


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