Has Healthcare Reform Lowered Medicare Expenditures?

Kevin Schulman, MD


September 30, 2014

In This Article

Why the Lowered Projections for Health Spending?

Now back to the main topic. The CBO has reduced its projection of federal health spending for 2039 from 9.6% of GDP to 8% of GDP. Given the enormous size of these programs (Medicare spending is over $600 billion, and the federal contribution to the Medicaid program is over $200 billion), this change has a large impact on projected federal spending.

Why the change? For one thing, the Supreme Court required states to be given a chance to opt into Medicaid expansion under healthcare reform. Roughly one third of this difference in projected health spending is accounted for by states choosing not to participate in this expansion.

Beyond this finding, the Centers for Medicare & Medicaid Services are not exactly clear on why this slowdown in spending has occurred within the Medicare program, although a decline in the rate of hospitalization is clearly a factor (either owing to use of short-stay units, less adoption of technology, or the growth of ambulatory surgery). They point to the possibility of spill-over effects from increasing rates of managed care participation in Medicare and public scrutiny of healthcare spending as possible influences on care patterns.

It is also possible that a focus on hospital-acquired infections has helped to reduce inpatient spending. Of note, the CBO explicitly stated that there is little evidence that changes in care management were responsible for the slowing of healthcare spending in Medicare.

One final note: Most of these savings have yet to occur—76% of the projected Medicare savings for the decade 2011-2020 are projected to occur starting in 2015. Obviously, there could be a lot of changes in utilization patterns within Medicare over the next several years, which will surely require another revision of this projection before 2039.

How to Learn More

So, what to make of the headlines? The story is much more complex than an effect of healthcare reform on slowing health spending.

To learn more, a good source of information is Medscape's new Business of Healthcare Academy which offers courses on healthcare policy and business topics. To peel back the onion on this problem, however, requires taking a hard look at a program as complex as Medicare.


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