Congress still wrestling with cost control

February 1, 2010

Policymakers have a poor record in cutting Medicare spending, even when the spending growth is down overall

But analysts on all sides are skeptical that projected savings in the final legislation are accurate or realistic.

Almost half of some $400 billion in proposed cuts to the Medicare program would result from reductions in payments to providers, but those often get rescinded later by politicians seeking support from local medical organizations. Another portion of Medicare savings is slated to come from curbs on Medicare Advantage, which also has strong political support for providing more generous care at lower costs to seniors.

Policymakers have a poor record in cutting Medicare spending. Even in a period of much slower growth in 2008 due to the economic recession, federal outlays continued to rise noticeably, particularly for Medicare. Payments to providers grew at a healthy pace, according to the actuaries at the Centers for Medicare and Medicaid Services, and increased enrollment in Medicare Advantage plans boosted outlays for that program.

The squeeze on state budgets also prompted Congress to approve a larger federal share of Medicaid costs to prevent reductions in state health care programs.

Besides the proposed reductions in Medicare spending, reform largely relies on a number of initiatives that promise more cost control is than likely to be realized:

At the same time, there's nothing in the legislation to limit malpractice lawsuits, a strategy that many analysts believe would reduce costly defensive medicine and doctors' costs. And there's no longer a public plan, which advocates regarded as a way to drive down private insurance costs.

Jill Wechsler, a veteran reporter, has been covering Capitol Hill since 1994.