CBO: Factors Other Than Recession Slowed Medicare Spending

The recession didn't affect Medicare spending growth in recent years, according to a report from the Congressional Budget Office.

The CBO compared spending growth between 2000 and 2005 with the growth that occurred between 2007 and 2010. Per-person spending growth went from 7.1 percent annually during the first time period to 3.8 percent during the second, according to the report. Hospital inpatient costs — which accounted for most of the program's spending — went from an average annual growth rate of 4.3 percent to 1.7 percent.

The CBO found no evidence the economic downturn affected beneficiaries' use of healthcare services and concluded it didn't contribute to the slowdown. Furthermore, slower Medicare payment growth rates and various factors affecting beneficiaries' demand for care such as changes in age and health status, prescription drug use growth and changes in supplemental coverage account for only 0.8 percentage points of the 3.2 percentage point drop in per beneficiary spending growth, according to the report.

The report speculates changes in the delivery of care that resulted in less volume and intensity and lower costs could have contributed to the slower growth rate. For example, providers more often treated high-cost beneficiaries in lower-cost care sites. Additionally, more beneficiaries moving into managed care plans, increasing pressure to contain healthcare costs and uncertainty about the future due to healthcare reform could have indirectly reduced the volume and complexity of care provided, according to the report.

Due to uncertainty about what caused the spending slowdown, the CBO has an incomplete understanding of whether or not the growth rate will continue to decrease. However, the report states the CBO has forecasted slower growth in the next few years than previously predicted.

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