Wednesday, August 17, 2011

Medicare Spending Slows: Is Healthcare Reform Underway?

Good news is hard to find these days, so when you do come across something positive a celebration seems to be in order. With all the discussions of debt and deficits, one point has always been obvious: the best way to address both is by controlling the rise in healthcare costs. Maggie Maher provides us with some good news on that front.

“From 2000 through 2009, Medicare’s outlays climbed by an average of 9.7 percent a year. By contrast, since the beginning of 2010, Medicare spending has been rising by less than 4 percent a year. On this, both Standard Poor’s Index Committee and the Congressional Budget Office (CBO) agree.”

Maher quotes a few people who should understand these matters and who believe that this is not just a statistical fluke. Rather, it is an indirect result of the passage of the healthcare act in 2010. A combination of the now recognized need to control costs, and the upcoming changes that will require a lowering of costs, is providing the motivation to begin making changes immediately.

“Zeke Emanuel, an oncologist and former special adviser for health policy to White House Office of Management and Budget director Peter Orszag, is certain that this is what is happening. When I spoke to him last week, Emanuel, said: ‘This is not mere chance: this is directly related to the initiation of health care reform.’ It is not the result of reform, Emmanuel emphasized. The reform measures that will rein in Medicare inflation have not yet been implemented. But, he explained, providers are ‘anticipating the Affordable Care Act kicking in.’ They can’t wait until the end of 2013: ‘They have to act today. Everywhere I go,’ Emanuel, added, ‘medical schools and hospitals are asking me, “How can we cut our costs by 10 to 15 percent?””

Maher also provides this chart.

There does appear to be a general trend towards slower growth in all the healthcare sectors, with Medicare providing the earliest and most dramatic effect.

“In the twelve months ending in May, overall spending by commercial health insurers climbed by 7.35 percent. By contrast, over the same span, Medicare claims rose at an annual rate of just 2.6 percent.”

One can only hope that these trends continue. It will be interesting to see how these lower growth rates affect budget deficit projections.

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