In the years since the passage of the Patient Protection and Affordable Care Act, the Congressional Budget Office has significantly decreased its spending projections for Medicare.
In a recent perspective piece, Kaiser Family Foundation researchers examined the spending slowdown by comparing CBO baseline projections from 2010 and 2014. Here are five things to know about Medicare spending growth and the potential reasons behind the deceleration.
1. Medicare spending is expected to be $11,328 per person this year, according to the CBO's 2014 estimates. That's down $1,048 from the projection the CBO issued in 2010 of $12,376. For 2019, the gap between the 2010 and 2014 baseline spending projections widens to $2,369 ($14,913 per person versus $12,545 per person).
2. Furthermore, the CBO has compared Medicare spending growth between 2000 and 2005 with the growth that occurred between 2007 and 2010 and found per-person spending growth went from 7.1 percent annually during the first time period to 3.8 percent during the second. Hospital inpatient costs — which accounted for most of the program's spending — went from an average annual growth rate of 4.3 percent to 1.7 percent.
3. Given that the CBO's August 2010 projections took the PPACA into account, it seems that the reform law may be having a larger impact on Medicare spending than anticipated, according to the Kaiser Family Foundation. The law contains various Medicare cost-cutting provisions, such as reduced Medicare provider payment updates and Medicare Advantage reimbursement cuts.
4. However, the PPACA is likely not the only factor behind the spending slowdown, although the drivers of the deceleration are still unclear. The recession didn't affect Medicare spending growth: The CBO has found no evidence that the economic downturn affected beneficiaries' use of healthcare services and concluded it didn't contribute to the slowdown. The Budget Control Act of 2011 likely did contribute to the slower growth rate through sequestration cuts that reduced payments to providers starting in 2013, according to the Kaiser Family Foundation. According to the Foundation, cost-cutting measures enacted by providers in response to healthcare reform could also be influencing Medicare spending.
5. Whatever the cause for the recent spending slowdown, it may not last for long. CMS has projected Medicare spending growth will accelerate to 7.4 percent annually from 2015 to 2022 because of rising enrollment, greater utilization, increased severity of illness and faster growth in input prices.
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