They find that the slowdown appears across nearly all service categories, and that for most service categories, slow growth in quantities, rather than prices, appeared to be the main driver of slow spending growth between 2009 and 2012.
Full Answer
Why is Medicare spending growing so slowly?
In addition, although Medicare enrollment has been growing between 2 percent and 3 percent annually for several years with the aging of the baby boom generation, the influx of younger, healthier beneficiaries has contributed to lower per capita spending and a slower rate of growth in overall program spending.
How much has Medicare spending increased since 2000?
Average annual growth in Medicare spending per beneficiary was just 1.7 percent between 2010 and 2018, down from 7.3 percent between 2000 and 2010. Spending on each of the three parts of Medicare (A, B, and D) has grown more slowly in recent years than in previous decades (Figure 5).
How much will Medicare spending increase between 2018 and 2028?
Between 2018 and 2028, net Medicare spending is also projected to grow as a share of the federal budget—from 14.1 percent to 17.9 percent—and the nation’s economy—from 2.9 percent to 4.2 percent of gross domestic product (GDP).
How much of the federal budget is spent on Medicare?
In 2018, Medicare spending (net of income from premiums and other offsetting receipts) totaled $605 billion, accounting for 15 percent of the federal budget (Figure 1). In 2018, Medicare benefit payments totaled $731 billion, up from $462 billion in 2008 (Figure 2) (these amounts do not net out premiums and other offsetting receipts).
What has changed in Medicare spending in the past 10 years?
Another notable change in Medicare spending in the past 10 years is the increase in payments to Medicare Advantage plans , which are private health plans that cover all Part A and Part B benefits, and typically also Part D benefits.
Why is Medicare spending so high?
Over the longer term (that is, beyond the next 10 years), both CBO and OACT expect Medicare spending to rise more rapidly than GDP due to a number of factors, including the aging of the population and faster growth in health care costs than growth in the economy on a per capita basis.
How is Medicare Part D funded?
Part D is financed by general revenues (71 percent), beneficiary premiums (17 percent), and state payments for beneficiaries dually eligible for Medicare and Medicaid (12 percent). Higher-income enrollees pay a larger share of the cost of Part D coverage, as they do for Part B.
How fast will Medicare spending grow?
On a per capita basis, Medicare spending is also projected to grow at a faster rate between 2018 and 2028 (5.1 percent) than between 2010 and 2018 (1.7 percent), and slightly faster than the average annual growth in per capita private health insurance spending over the next 10 years (4.6 percent).
How much does Medicare cost?
In 2018, Medicare spending (net of income from premiums and other offsetting receipts) totaled $605 billion, accounting for 15 percent of the federal budget (Figure 1).
How is Medicare's solvency measured?
The solvency of Medicare in this context is measured by the level of assets in the Part A trust fund. In years when annual income to the trust fund exceeds benefits spending, the asset level increases, and when annual spending exceeds income, the asset level decreases.
How much will Medicare per capita increase in 2028?
Medicare per capita spending is projected to grow at an average annual rate of 5.1 percent over the next 10 years (2018 to 2028), due to growing Medicare enrollment, increased use of services and intensity of care, and rising health care prices.
Our Approach
Summary of Prior Research
- Slow growth in spending in the Medicare program is one piece of a larger puzzle: the surprisingly slow growth in overall health care spending in recent years. Analysts have noted a slowdown in total health care spending beginning in 2005,1 and a number of recent studies have examined the explanations for, and implications of, that broader slowdown of health care costs. The debate h…
Quantifying The Gap Between Projected and Actual Medicare Spending in 2014
- To quantify the gap between projected Medicare spending in 2014 and actual spending this year, we compare actual 2014 spending with CBO’s 2009 “baseline” amount for 2014 (including an upward adjustment to physician payments to account for the fact that Congress has overridden the cuts called for by the SGR). That baseline reflects CBO’s best guess of Medicare’s spending t…
Explaining The Gap Between Projected and Actual Medicare Spending in 2014
- Expected Effects of Changes in Medicare Policy Since 2009
In a program as large and complex as Medicare, three factors make it difficult to measure with any precision the spending effects of any specific policy change: 1) many aspects of the Medicare program are changing at the same time, 2) the program is embedded within a larger health care … - Slower Growth in Prescription Drug Spending
Analysts have shown that the growth rate in overall prescription drug spending has been relatively low since 2003, and lower than in previous years.26 This slow growth rate has been reflected in slower growth in Medicare Part D spending than CBO projected when the drug benefit was estab…
Conclusion
- Much has been written about the slow growth in Medicare spending in recent years. This analysis aims to elaborate on the factors behind the gap between CBO’s 2009 projections of what Medicare spending would be in 2014 and actual 2014 spending. Our analysis shows that policy choices make a difference: the ACA and BCA, along with various policies adopted by the Admini…
Summary
- Medicare, the federal health insurance program for nearly 60 million people ages 65 and over and younger people with permanent disabilities, helps to pay for hospital and physician visits, prescription drugs, and other acute and post-acute care services. This issue brief includes the most recent historical and projected Medicare spending data published in the 2018 annual repor…
Health
- In 2017, Medicare spending accounted for 15 percent of the federal budget (Figure 1). Medicare plays a major role in the health care system, accounting for 20 percent of total national health spending in 2016, 29 percent of spending on retail sales of prescription drugs, 25 percent of spending on hospital care, and 23 percent of spending on physician services.
Cost
- In 2017, Medicare benefit payments totaled $702 billion, up from $425 billion in 2007 (Figure 2). While benefit payments for each part of Medicare (A, B, and D) increased in dollar terms over these years, the share of total benefit payments represented by each part changed. Spending on Part A benefits (mainly hospital inpatient services) decreased from 47 percent to 42 percent, sp…
Causes
- Slower growth in Medicare spending in recent years can be attributed in part to policy changes adopted as part of the Affordable Care Act (ACA) and the Budget Control Act of 2011 (BCA). The ACA included reductions in Medicare payments to plans and providers, increased revenues, and introduced delivery system reforms that aimed to improve efficiency...
Effects
- In addition, although Medicare enrollment has been growing around 3 percent annually with the aging of the baby boom generation, the influx of younger, healthier beneficiaries has contributed to lower per capita spending and a slower rate of growth in overall program spending. In general, Part A trust fund solvency is also affected by the level of growth in the economy, which affects …
Impact
- Prior to 2010, per enrollee spending growth rates were comparable for Medicare and private health insurance. With the recent slowdown in the growth of Medicare spending and the recent expansion of private health insurance through the ACA, however, the difference in growth rates between Medicare and private health insurance spending per enrollee has widened.
Future
- While Medicare spending is expected to continue to grow more slowly in the future compared to long-term historical trends, Medicares actuaries project that future spending growth will increase at a faster rate than in recent years, in part due to growing enrollment in Medicare related to the aging of the population, increased use of services and intensity of care, and rising health care pri…
Funding
- Medicare is funded primarily from general revenues (41 percent), payroll taxes (37 percent), and beneficiary premiums (14 percent) (Figure 7). Part B and Part D do not have financing challenges similar to Part A, because both are funded by beneficiary premiums and general revenues that are set annually to match expected outlays. Expected future increases in spending under Part B and …
Assessment
- Medicares financial condition can be assessed in different ways, including comparing various measures of Medicare spendingoverall or per capitato other spending measures, such as Medicare spending as a share of the federal budget or as a share of GDP, as discussed above, and estimating the solvency of the Medicare Hospital Insurance (Part A) trust fund.
Purpose
- The solvency of the Medicare Hospital Insurance trust fund, out of which Part A benefits are paid, is one way of measuring Medicares financial status, though because it only focuses on the status of Part A, it does not present a complete picture of total program spending. The solvency of Medicare in this context is measured by the level of assets in the Part A trust fund. In years whe…
Benefits
- A number of changes to Medicare have been proposed that could help to address the health care spending challenges posed by the aging of the population, including: restructuring Medicare benefits and cost sharing; further increasing Medicare premiums for beneficiaries with relatively high incomes; raising the Medicare eligibility age; and shifting Medicare from a defined benefit s…