Medicare bends curve on FFS spending

December 11, 2013

Slow down due to changes in the behavior of beneficiaries and providers.

According to a blog by Doug Elmendorf, director of the Congressional Budget Office (CBO), growth in Medicare fee-for-service spending has slowed significantly in the past few years. He attributes the slow down not to the recession but changes in the behavior of beneficiaries and providers.

The blog is not specific on the behaviors that affected the curve but notes average payment rates have fallen 0.2% since 2000, and changes in age and health status have produced a 0.3% drop in spending.

Elmendorf says the slowdown has lasted for several years and is not “just a flash in the pan.” Multiple programs were examined so the trend does not appear to be an isolated development, he says.

Federal spending for Medicare, Medicaid, the Children’s Health Insurance Program equaled less than 3% of GDP on average during the past 40 years. It is 4.5% of GDP for 2013 and estimated at 6% of GDP in 2023 and 8% in 2038. In 2014 and beyond, federal spending will also include exchange subsidies. Federal spending growth on Medicaid is projected at 1.3% per year.

He says three things that will drive increased federal spending over the next 25 years include:

·      Aging of the population (35%)

·      Expansion of coverage under the Affordable Care Act (25%)

·      Excess cost growth (40%)