Much attention has been paid to the federal deficit, and a great deal of this discussion has centered on Medicare and Medicaid spending. As a means for controlling what has been considered “out of control” health care costs, some have pushed for major program restructuring, most notable premium support for Medicare and blocking granting for Medicaid. Those proposals generally aim to bring spending growth rates more in line with that of current economic growth.
But increases in Medicare and Medicaid spending can be attributed to increased enrollment for the most part, explain authors of Urban Institute’s Medicare, Medicaid and the Deficit Debate: Timely Analysis of Immediate Health Policy Issues. On a per enrollee basis, Medicare and Medicaid spending growth is in line with private health spending and thus not “out of control.” That said, a portion of the nation’s budget challenge has been caused by an increase in enrollment and spending per enrollee.
Between 2011 and 2020, spending growth per enrollee is projected to fall below private insurance rates and fall in-line with gross domestic product (GDP) per capita growth, state both the Centers for Medicare and Medicaid Services (CMS) and the Congressional Budget Office (CBO). Reasons for this slowdown include a slower relative GDP growth rate, increased private insurance cost sharing, slowed growth in prescription drug spending, Medicare payment policies, and the 2018 excise tax on high-cost insurance premiums.
Projected annual Medicare growth during the next decade is 5.7 percent, while projected annual private health expenditure is 5.8 percent during the same period. While growth rates are comparable, aging baby boomers are expected to drive Medicare enrollment up.
During the past 10 years, two economic recessions and nearly three percent per year growth rates in the disabled population have contributed to an increase in Medicaid expenditures. Spend per enrollee for private health insurance and Medicare is projected to grow 4.9 and 2.7 percent per year respectively, with slower Medicare growth largely due to the Affordable Care Act’s provider payment cuts.
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