Medicare cost growth still very, very low

by Joan McCarter –


Is it time yet?

While healthcare costs overall have increased—as expected with all the new patients thanks to Obamacare—in the last few quarters, Medicare spending growth is really, really slow. The Committee for a Responsible Federal Budget finds that Medicare growth in the first eight months of this fiscal year has been just 0.3 percent. Some of that can be accounted for by federal policies, “the Medicare sequester [which wasn’t in effect for part of FY 2013], payment reductions in the Affordable Care Act for home health agencies and Medicare Advantage plans, ramped-up hospital readmission penalties, and frozen means-tested Medicare premium income thresholds.” Even without those factors, though, costs are being held down.

Chart of year-to-date Medicare growth

Adjusted for timing shifts, Medicare growth is even lower through eight months at just 0.3 percent. And even after removing the effects of temporary policies, year-to-date Medicare growth remains extremely low at 2.5 percent, even lower than through April. This is more than a full percentage point below economic and beneficiary growth, meaning that even excluding one-time effects, Medicare spending is on pace to both fall as a percent of GDP and on a per-capita basis. [emphasis in original, which tells you how big a deal this is to these analysts!]

The Incidental Economist notes that economic growth is 3.9 percent. Obamacare’s supposed “death panel,” the Independent Payment Advisory Board would kick in when spending reached GDP + 1 percent. We’re nowhere near that now. So yes, this is pretty good news for Medicare, and should mean the end to any talk about raising the eligibility age for the program, or doing more means testing. Hell, maybe now would be time to start talking about expanding the program. Medicare at 55, anyone?

Reprinted with permission from Daily Kos

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