Medicare Spending May Fix Itself, Without Republicans’ Budget Cuts

As Republicans push the country toward draconian spending cuts, it’s important to remember the uncertainty built into the debt projections that the GOP touts to justify their policies. Health care spending is a big part of this: Medicare is one of the biggest single drivers of long-term debt, but that doesn’t necessarily mean we need to cut the program’s budget.

In fact, between 2010 and 2013, the Congressional Budget Office’s projections of how much the program would spend over the next decade dropped by $500 billion — not because lawmakers cut any spending, but simply because the growth of health care costs in the markets as a whole unexpectedly slowed after 2008. The Washington Post’s Sarah Kliff dug a chart out of the White House’s annual Economic Report of the President that drives home what a game-changer it would be if that slow-down sticks.

The blue line below represents the projection of Medicare’s spending made in the 2012 Medicare Trustees report, based on current law. The dotted orange line is Medicare’s spending if health care cost growth holds to its trend since 2008:

If the past few years turn out to be the new norm, Medicare will stay essentially flat as a share of the economy going forward. In which case, the problem of Medicare spending — and with it, much of our long-term debt problem — has already been solved. This is something CBO wouldn’t have picked up on yet, precisely because their method for projecting health care costs rests on the assumption that trends over the last two decades hold roughly steady.

There’s a good chance the unusually low growth trends of the last few years won’t hold. They may be due to the recession, and thus purely temporary. But they might also be due to more durable changes in health care markets.

Obamacare included a long list of reforms to the way we buy and sell care, some of which have already been implemented. And care providers are already changing the way they do business in anticipation of the rest. Kliff found some evidence that this is having an effect in the White House report as well:

[The report] includes data on the level of hospital readmissions for Medicare patients. These are typically considered a sign of unnecessary, costly care — patients don’t usually return to the hospital because they’re feeling in top shape.

For years now, that number has hovered around 19 percent of patients being readmitted to the hospital. Then, in September 2012, it dropped down to 17.8 percent.

Obviously, that first graph presents something of a best-case scenario. But it’s certainly a plausible scenario — and a reminder of how mercurial projections of our future debt actually are, and how far we may already have come in solving the problem without even knowing it.