Medicare’s cost controls can’t control an aging population

January 10, 2013

Here is a chart, published today by Health and Human Services, that shows how quickly the agency expects Medicare costs to grow over the next two decades:

Most of the growth above and beyond overall economic growth has to do with the Medicare population getting older and bigger. That's what you see in the blue bars in the chart above. 

It's also worth looking at the red bars, which represent the "excess cost growth," essentially medical prices growing faster than the rest of the economy. This report projects that Medicare cost growth will actually be slower through 2022. That probably has a lot to do with the Affordable Care Act reducing reimbursement rates to the doctors and hospitals who treat Medicare patients.

Actuaries then predict that cost growth will begin exceeding the rest of the economy's growth in 2023. Even then though, the red lines are a lot smaller than the blue lines, the big takeaway being: One huge reason Medicare is becoming more expensive is simple because of population aging. There's not much that reducing prices can do about that.

Correction: This blog post inaccurately referred to this graph as representing a baseline where the Medicare's Sustainable Growth Rate cuts, productivity adjustments and IPAB were all eliminated. The accurate baseline it represents is one where only the Sustainable Growth Rate cuts are eliminated.

 

Continue reading
Comments
Show Comments
Most Read Business

business

wonkblog

Success! Check your inbox for details.

See all newsletters