August 27, 2014
Medicare: Not Such a Budget-Buster Anymore (NY Times, AUG. 27, 2014)
Posted by Orrin Judd at August 27, 2014 7:03 PMThe changes are big. The difference between the current estimate for Medicare's 2019 budget and the estimate for the 2019 budget four years ago is about $95 billion. That sum is greater than the government is expected to spend that year on unemployment insurance, welfare and Amtrak -- combined. It's equal to about one-fifth of the expected Pentagon budget in 2019. Widely discussed policy changes, like raising the estate tax, would generate just a tiny fraction of the budget savings relative to the recent changes in Medicare's spending estimates.In more concrete terms, the reduced estimates mean that the federal government's long-term budget deficit is considerably less severe than commonly thought just a few years ago. The country still faces a projected deficit in future decades, thanks mostly to the retirement of the baby boomers and the high cost of medical care, but it is not likely to require the level of fiscal pain that many assumed several years ago.The reduced estimates are also an indication of what's happening in the overall health care system. Even as more people are getting access to health insurance, the costs of caring for individual patients is growing at a super-slow rate. That means that health care, which has eaten into salary gains for years and driven up debt and bankruptcies, may be starting to stabilize as a share of national spending. [...][M]uch of the recent reductions come from changes in behavior among doctors, nurses, hospitals and patients. Medicare beneficiaries are using fewer high-cost health care services than in the past -- taking fewer brand-name drugs, for example, or spending less time in the hospital. The C.B.O.'s economists call these changes "technical changes," and they dominate the downward revisions since 2010.In all, technical changes have been responsible for a 12 percent reduction since 2010 in the estimates for Medicare spending over the decade ending in 2020. In dollar terms, that's over $700 billion, which is more than budget cutters could save by eliminating the tax deduction for charitable giving or by converting Medicaid into a block-grant program or cutting military spending by 15 percent.