Short Takes On News & Events

CBO Says Medicare Spending Growth Slower Than Expected

By Sarah Barr

August 22nd, 2012, 3:31 PM

Amid its grim projections for the economy overall, the Congressional Budget Office on Wednesday said that Medicare spending growth is slowing, although the program will take up a larger share of the economy in a decade than it does now.

In an update to its January report on the nation’s budget and economic outlook, CBO said that outlays for Medicare will total 3.7 percent of the gross domestic product in 2013, rising to 4.3 percent of GDP in 2022, as enrollment in the program increases.

But the report also noted that for the third year in a row, CBO expects the growth in Medicare spending in 2012 to be “substantially slower” than anticipated earlier in the year.

CBO Director Doug Elmendorf said at a press conference that the slower growth in Medicare is consistent with slower health care cost growth throughout the economy, which many analysts have observed. But he said it’s still unclear why the slowdown is happening.

“Presumably, the weak state of the economy is a factor, but given the magnitude of the slowdown in national health spending and the timing of that slowdown, which seems to have started before the recession, we and most analysts think there are probably structural factors at work as well,” he said. Those structural factors could include slower growth of spending on prescription drugs, changes in the health care delivery and payment system, and higher out-of-pocket spending for consumers, according to Elmendorf.

The report also looked at Medicaid. Federal outlays for the program are expected to total 1.7 percent of GDP next year and 2.4 percent of GDP in 2022 as the program expands under the 2010 health law. In comparison to its March projections though, the CBO said Medicaid spending would decrease by $325 billion, or 7 percent, from 2013 to 2022. The bulk of that reduction is due to the Supreme Court’s ruling on the health law, which makes optional an expansion of the program that the law essentially required all states to put in place.

Overall, CBO said that the economy could return to a recession in 2013 if lawmakers do not avoid a set of tax increases and spending reductions that will take effect in January, a deadline often referred to as the “fiscal cliff.”

Physicians face a 27 percent cut in their Medicare payments next year unless lawmakers forestall the hit. Congress historically has acted to avoid such cuts, which are the result of a formula known as the sustainable growth rate. CBO said that holding Medicare physician payment rates at current levels next year would cost $10 billion, and a total of $245 billion if they were left unchanged through 2022.

But even if Congress averts the fiscal cliff and a recession, the economy cannot sustain the high debt levels that would result in the long term if current tax and spending levels are left unchanged, according to Elmendorf.

“The key issue facing policymakers is not whether to reduce budget deficits relative to those that would occur under current policies. The question is when; the question is how,” he said.

5 Responses to “CBO Says Medicare Spending Growth Slower Than Expected”

  1. ozzie says:

    Substantially slower growth in Medicare costs? Must be a mistake, huh? Repiglicans say it can’t be possible because they keep repeating that Obama “stole” $716 billion from Medicare. Stole it! Robbed it! Took it a stuck it in his wallet! Fact is, Medicare growth is slowing mainly because of the new health care reform law that gives many new benefits to seniors while insisting on quality care and less hospital re-admissions. Repigs need to get real and admit that Obamacare is working and the $716 billion that they say Obama “stole” is really savings from overpayments to private insurers for very few Medicare Advantage policies that were way overpriced and didn’t offer seniors anything better than standard Medicare.

  2. Pete says:

    $15.566 trillion in National Debt… was only 9 Trillion when the all mighty one took office.

  3. JC says:

    Just to be precise- The day President Obama was sworn into office (Jan 20, 2009), the Total Public Debt was $10,626,877,048,913.

  4. Harry says:

    Increase public debt from $10 Trillion under Bush to $15 Trillion under Obama? We are still paying for the remnants of an unfunded war in Iraq. We are still paying for an unfunded war in Afghanistan. We are still paying for an unfunded Bush Tax Cut for the wealthy in 2001. We are still paying for an unfunded Bush Tax Cut for the wealthy in 2003. We are still paying for an unfunded Medicare Part D. ALL UNFUNDED FROM THE BUSH/CHENEY ERA. The only unfunded spending Obama had the chance to do was the 2009 stimulus to try to get our economy out of the huge mess he inherited from the Bush/Cheney era. Guess what? The stimulus should have been at least twice the amount since the recession Obama inherited was the worst downturn since the crash of 1929. Don’t tell me Republicans are fiscal conservatives. Morons like Paul Ryan voted to support all of the above Bush/Cheney unfunded spending and he got some of the Obama stimulus money for his own district. Hypocrite!

  5. Harry says:

    By the way, Medicare spending growth has slowed because of the reduced spending on Medicare Advantage. Medicare Advantage is a 15 year failed attempt to privatize Medicare. In Medicare Advantage, the private insurance companies were given the opportunity to offer “private” Medicare policies instead of standard Medicare. The cost quickly grew to as much as 25 percent above the cost of standard Medicare and Medicare Advantage wasn’t offering a much better deal. Just a few small frills. So, Obamacare began to put an end to the Medicare Advantage gravy train for the private insurance companies. That reduction in spending on bogus Medicare Advantage plans is the main reason we are seeing the slower growth in standard Medicare. It’s more proof that the private insurance companies, when given a chance, will corrupt everything they get their hands on. The greed is outrageous. Paul Ryan wants to do it again in his Ryan Budget. Ryan wants privatize Medicare and turn the entire Medicare system over to Wall Street. Haven’t we learned anything from what the corrupt private insurers did with Medicare Advantage? How many times do we need to watch this movie? We know how it ends. Privatizing Medicare will end up just like what Wall Street did to us in 2008.