For years lawmakers, policy experts and journalists have fretted about the explosive growth of health care spending. Lately, though, the situation has quietly been improving — as the most recent government data released last week again confirmed.
The trustees of Social Security and Medicare reported that the latter program should have enough money in its hospital insurance trust fund to last through 2030 — four years longer than projected last year and 13 years longer than projected in 2009. The Congressional Budget Office’s updated estimate of long-term federal spending on major health programs (Medicare, Medicaid, the Children’s Health Insurance Program and Obamacare health care exchange subsidies) would equal 8 percent of GDP in 2039 — 1.6 percentage points, or about 15 percent, less than the 9.6 percent the agency projected in 2010. It’s now 4.8 percent of GDP.
Some of the Medicare slowdown may be attributable to curbs on hospital readmissions caused by President Obama’s health care reform, but the law is still too new to explain all or even most of the cost moderation.
The real issue is how to respond to this unexpected and unexplained good news. No doubt the path of least resistance, politically, would be to pocket the recent gains in Medicare’s life expectancy and postpone systemic reform, perhaps on the theory that such changes must await perfect understanding of the cost-moderation trend. On the other hand, if the sustainability of federal health programs is a slightly less daunting problem than it seemed, it might be less painful to solve, too — so why not get on with it?
Medicare’s patchwork of cost-sharing requirements, for example, neither encourages participants to limit consumption of services nor shields them from catastrophic expenses. Many therefore buy “Medigap” coverage that eliminates most out-of-pocket costs, further reducing their incentive to limit unnecessary consumption. The CBO has estimated that uniform cost-sharing and restricting Medigap plans could save $92.5 billion over 10 years.