How Slowly is Medicare Spending Growing?

In a recent article in the New England Journal of Medicine, two members of the Center for Studying Health System Change contend the recent slowdown in Medicare spending growth is not a fluke and is indicative of the future.

Paul Ginsburg, PhD, president of HSC, and Chapin White, PhD, senior health researcher at HSC, show that Medicare spending growth has, in fact, slowed considerably over the past few years. Medicare expenditures per beneficiary were in line with the growth of the economy in both 2010 and 2011. In August 2011, the Medicare actuary predicted the Part B premium for 2012 would be $106.60, but the actual premium was only $99.90. And last month, the Congressional Budget Office also lowered its 10-year Medicare spending projection by $69 million.

However, there are also long-term trends, many enforced by Congress, that lead toward "tighter Medicare payment policy," they wrote. For example, the Deficit Reduction Act of 2005 reduced payment rates for imaging, home health services and durable medical equipment. The Medicare Improvements for Patients and Providers Act of 2008 also significantly cut Medicare Advantage plans. Finally, the annual Congressional override of the sustainable growth rate — although problematic — has slowed physician fees to fall way behind inflation.

Enter the Patient Protection and Affordable Care Act. The authors said the PPACA permanently slows the growth in Medicare payment rates for almost every provider other than physicians, but questions have been raised about how sustainable those reductions will be. "As the frequent SGR fixes have demonstrated, when sustaining past budget decisions seems like a bad idea, they are not sustained," they wrote.

Dr. Ginsburg and Dr. White conclude that historically, "simple-minded" Medicare payment cuts lead to broader payment reform, similar to the PPACA. Accountable care organizations, bundled payments and other payment reforms have the potential to increase the efficiency of healthcare delivery and Medicare spending, similar to the inpatient prospective payment system, they wrote.

More Articles on Medicare:

The 2012 Payroll Tax-SGR Bill: What It Means for Hospitals

St. Vincent's HealthCare CFO Mark Doyle: 3 Burning Questions Right Now

Which States, Specialties Contributed Most to the SGR Deficit?

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