Slower Growth in Medicare Spending—Is This the New Normal?

NEJM Perspective: Recent Slowdown in Medicare Spending Growth Likely More Than a 'Fluke'

Media Advisory
March 7, 2012

FURTHER INFORMATION, CONTACT:
Alwyn Cassil (202) 264-3484 or acassil@hschange.org

WASHINGTON , DC—While the economic downturn and other temporary factors likely have a role in slowing Medicare spending growth, past cost-control efforts and the looming specter of broader provider payment reform may signal a longer-term slowdown in Medicare spending growth, according to a perspective by researchers at the Center for Studying Health System Change (HSC), published online today in the New England Journal of Medicine.

“On the whole, we do not believe that the recent slowdown in Medicare spending growth is a fluke,” write HSC Senior Researcher Chapin White, Ph.D., and HSC President Paul B. Ginsburg, Ph.D.

“Over the past four decades, the average growth in Medicare spending per enrollee has exceeded the growth in per capita gross domestic product by 2.6 percentage points per year. This trend is unsustainable: if it continued, Medicare would consume all federal revenues by 2060,” according to the article.

Pointing to a “long-term trend toward tighter Medicare payment policy” and looming reductions in the growth of Medicare payment rates for almost all categories of providers other than physicians enacted in the Affordable Care Act (ACA), the authors note that the Congressional Budget Office projects that Medicare spending per enrollee will grow more slowly than the overall economy over the next decade.

While some have questioned the sustainability of the ACA reductions, “merely undoing the ACA cuts would mean reverting back to the ‘old normal’ of unsustainably high growth in Medicare outlays,” according to the article.

“The framers of the ACA perceived broad provider-payment reform as the best prospect for slowing the long-term spending trend. But they needed scoreable savings, and they could ill afford to alienate backers by forcing through major payment reforms at the same time. The ACA planted the seeds for accountable care organizations (ACOs), bundled payment for episodes of care, patient-centered medical homes, and incentives for reducing readmissions. Now those seeds offer a way forward,” the authors write.

To access the NEJM article, “Slower Growth in Medicare Spending—Is This the New Normal?” go to www.hschange.org/CONTENT/1278/.

The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nation’s changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is affiliated with Mathematica Policy Research.