Snap Fact #252 - Declining Medicare Costs Attest To The Promise Of President Obama’s Affordable Care Act!

Post date: Jul 21, 2012 1:5:15 AM

Snap Fact #252

Declining Medicare Costs Attest To The Promise Of President Obama’s Affordable Care Act! 

Romney tries to claim that President Obama’s policies, rather than the GOP’s, would end Medicare as we know it. The main question Romney asks is, “Why is President Obama ending Medicare as we know it by allowing it to go bankrupt in less than 15 years?” This is the typical GOP misrepresentation of the policy in the Affordable Care Act to eliminate wasteful payments to Medicare Advantage (and by the way, Medicare Advantage has actually thrived as a result). 

The 2010 healthcare law contained cuts to Medicare Advantage that were strongly opposed by Republicans and insurance companies. The Obama administration predicted that Medicare Advantage premiums would fall for enrolees as a result of officials' negotiations with insurers. The program offers care to seniors through private insurers that contract with the Medicare agency. The Kaiser Family Foundation found that this year, enrolment in the program grew by 10 percent — jumps were seen in all but two states — and that the average monthly premium paid by enrolees dropped by $4. The program now covers more than 13 million beneficiaries, or 27 percent of the Medicare population, the report stated. 

There are other indications that Medicare spending growth has slowed. One highly visible gauge of Medicare spending trends is the standard monthly Part B premium, which is set by the Medicare actuary to cover one quarter of total Part B spending. In August 2011, the actuary projected that the Part B premium for 2012 would be $106.60, but the actual premium was set in November at only $99.90. A much broader indicator of a slowing trend is the fact that growth in Medicare outlays per enrollee in 2010 and 2011 was roughly in line with growth in the economy. And in January 2012, the Congressional Budget Office (CBO) made a $69 billion downward revision to its 10-year Medicare spending projection — a technical correction that reflects emerging data showing surprisingly slow growth in outlays. Similar slowing trends have led to positive earnings surprises for publicly traded insurers. 

But the danger for Romney – and all budget hawks with their knives out for Medicare – comes in this chart. 

The slower growth of health spending in the last few years, surprised experts and offers some optimism about the federal government’s long-term fiscal performance. Much of the slowdown is because of the recession, and thus not unexpected. But some of it seems to be attributable to changing behavior by consumers and providers of health care — meaning that the lower rates of growth might persist even as the economy picks up. 

In 2009 and 2010, total nationwide health care spending grew less than 4 percent per year, the slowest annual pace in more than five decades, according to the latest numbers from the Centers for Medicaid and Medicare Services. After years of taking up a growing share of economic activity, health spending held steady in 2010. The growth rate mostly slowed as millions of Americans lost insurance coverage along with their jobs. Worried about job security, others may have feared taking time off work for doctor’s visits or surgical procedures, or skipped non-urgent care when money was tight. 

Still, the slowdown was sharper than health economists expected, and a broad, bipartisan range of academics, hospital administrators and policy experts started to wonder if what had seemed impossible might be happening. 

If doctors and patients have begun to change their behavior in ways that bend the so-called cost curve, the implications would be enormous. Policy makers on both sides of the aisle see rising health care costs as the central threat to household budgets and the country’s fiscal health. If the growth in Medicare were to come down to a rate of only 1 percentage point a year faster than the economy’s growth, the projected long-term deficit would fall by more than one-third. 

Health economists point to a shift toward accountable care, in which providers are paid for the quality of care, not the quantity; like assigning specially trained nurse practitioners to patients with multiple chronic conditions to make sure they take their medications and to prevent hospitalizations, like emphasis on healthcare practices to keep people out of the hospital and emergency rooms. 

Many health care experts said they believed that the shift toward publicizing medical error rates and encouraging accountable care seemed to be paying dividends 

Moreover, experts said not to discount the accountable-care revolution just because it remained small or because the changes implemented by the Obama health care law had not come into full effect yet. 

“In the past, these slowdowns have occurred not just because of the direct effect of reforms, but because of greater attention to reforms changing provider and patient behavior,” said Mark B. McClellan, the economist and doctor who ran Medicare and Medicaid under President George W. Bush. 

Starting in 2014, the law requires most Americans to have health insurance. It also offers subsidies to help people pay for insurance bought through markets known as insurance exchanges. At issue is whether the subsidies will be available in exchanges set up and run by the federal government in states that fail or refuse to establish their own exchanges. Critics say the law allows subsidies only for people who obtain coverage through state-run exchanges. The White House says the law can be read to allow subsidies for people who get coverage in federal exchanges as well. 

It shows that per-capita Medicare spending is actually declining, as the program becomes better at reining in costs. If this continues, as it is with ACA reforms phasing in, you will see cost growth in Medicare dip below GDP on a per-capita basis.