HHS patted itself on the back Wednesday, saying Medicare spending was $316 billion lower than expected between 2009 and 2013 thanks to its policies. But various economic trends indicate the slowdown may not last.
Annual spending on Medicare beneficiaries—those in traditional Medicare and Medicare Advantage—grew by 5.9% on average from 2000 to 2008. That annual growth rate dropped to 1.8% from 2009 to 2012, according to an HHS report (PDF). In 2013, expenditures for Medicare members increased by only 0.2%.
If spending on Medicare between 2009 and 2013 had increased at the previous levels, the government would have spent $316 billion more, HHS said. About $198 billion in savings came from lower growth rates in traditional Medicare, and $118 billion was saved in Medicare Advantage.
Much of the historically low healthcare spending growth has been linked to the economic recession, payment reforms in the Affordable Care Act and the rising prevalence of health plans that force consumers to shoulder a higher percentage of their out-of-pocket costs. HHS said the reduced Medicare spending had less to do with the recession and more to do with the ACA and other government-backed policies.
For instance, HHS touted accountable care organizations and other alternative payment models that pay hospitals and doctors for the quality of care provided rather than exclusively for the number of services provided. The government said reduced Medicare payments for inpatient hospital services and enhanced fraud efforts have also stemmed the tide of rising Medicare costs.
The savings have clearly helped Medicare's solvency. Medicare's hospital trust fund isn't expected to be depleted until 2030, according to last year's analysis.
But HHS and President Barack Obama's healthcare law are not the only factors driving the reduced spending. Thousands of baby boomers age into the Medicare program daily, and statistics show younger Medicare beneficiaries do not cost the program as much as older ones.
George Miller, a health economist at the Altarum Institute's Center for Sustainable Health Spending, said those smaller per-capita costs have helped Medicare the past few years. But “that's not going to last forever,” he said.
Further, Altarum found spending in hospitals increased significantly in the late part of 2014 and the early months of 2015. Higher hospital expenditures are also likely to hit Medicare spending.
Early this month, the CMS bumped up final 2016 rates for Medicare Advantage plans largely due to large upticks in hospital spending.
“Initial information from Medicare actuaries suggests that contributing factors behind the change from the preliminary growth rate include higher-than-expected spending on inpatient hospitalizations and some intermediary services such as therapy, rural health clinics and federally qualified health centers,” the CMS said.
