Dive Brief:
- Actuaries at the Centers for Medicare and Medicaid Services have released a new spending projection report. Though Medicare spending traditionally grows more rapidly than the economy, the report showed that spending per beneficiary is actually falling.
- The program, which provides health coverage for people over the age of 65 or who are disabled, spent an average of $12,000 per beneficiary annually three years ago. This year, according to an article in the New York Times, they will pay an average $11,200 per person, and that number is expected to remain lower than that until 2020.
- This happened only one other time—in the late 1990s—when Congress cut Medicare spending. Experts attribute this recent drop in spending to two factors: the Baby Boom generation entering the program and swaying it to a younger, healthier population; and a trend toward the use of fewer expensive medical services by beneficiaries.
Dive Insight:
Healthcare spending in general is growing at a slower rate than in years past, something health economists call "negative excess cost growth." Modern Healthcare projects all spending to grow at a rate of about 5.7% through 2023. This is lower than previous years' growth, which averaged just above 7% annually. While some experts predict that spending both overall and in Medicare will remain low, it is difficult to forecast accurate numbers because of the myriad changes in healthcare and in the economy.
The New Republic noted that healthcare spending mirrors the economy, but with a time lag. The recession could be causing people to use fewer services, a trend which would change as the economy improves. People are also paying more out of pocket; providers have new federal incentives to provide quality care at a lower cost; and the government has made cuts in Medicare and Medicaid. Some experts predict that Medicare spending will remain slow because of people seeking out less care. Others expect the number of Baby Boomers funneling into the system to cancel that out, causing spending to begin increasing again by 2016.
This report is a big deal, although economists are still working out how to interpret it. Expect a myriad of op/eds with conflicting headlines.
Just read 6 health spending projection stories. They're pretty much all the same. If you haven't written yours yet, maybe do something else.
— Austin Frakt (@afrakt) September 3, 2014