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Medicare’s Projected Spending Has Dropped $500 Billion Without Lawmakers Cutting A Dime

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"Medicare’s Projected Spending Has Dropped $500 Billion Without Lawmakers Cutting A Dime"

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Medicare will spend $511 billion less between now and 2020 than was predicted two and a half years ago, according to the latest number crunching by the Center On Budget and Policy Priorities. More importantly, this drop occurred completely separate from any changes in government policy — rather, it resulted from an overall slowdown in the growth of health care costs.

The last time the Congress and the President actually altered Medicare policy in order to bring down the program’s spending was when they passed health reform in March of 2010. By comparing the Congressional Budget Office’s projections from August of that year with their projections from earlier this month, and by leaving out the the SGR cuts and the Medicare cuts in sequestration, the CBPP was able to isolate how much Medicare’s spending is anticipated to drop due purely to changes in the health care markets. And the drop is considerably larger than the proactive cuts in Medicare spending the Simpson-Bowles plan was calling for back in December of 2010:

According to the CBO itself, its projections for Medicare and Medicaid spending between now and 2022 dropped 3.5 percent since its previous projection in August of 2012.

Spending on Medicare and Medicaid is the main driver of the country’s long-term debt problem. But because the programs buy health care, larger economic forces in the health care market that drive up costs also drive up their spending, regardless of any specific policy enacted by lawmakers. Conversely, if health costs begin to slow, that will bring spending down — and there’s evidence that’s exactly what’s happened over the last few years.

Between 2009 and 2011, all spending in the health care system, both public and private, grew at 3.9 percent — the lowest annual rates we’ve seen in 52 years. 2012 looks like it will turn out to be similarly sluggish. Some of this is certainly due to the recession and ongoing depression. But an increasing number of economists and experts are convinced a big piece of the slowdown is also a more permanent restructuring of the way health care markets buy, sell, and deliver care.

No small part of that change may be due, in turn, to the passage of Obamacare, which put in place a host of new incentives and reforms to move health care delivery in a more efficient direction. And if Obamacare’s reforms continue pushing the health care system to adapt, then the United State’s fiscal future could continue to improve without lawmakers having to cut a dime.

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