September 07, 2023

Pleasant Surprise: Medicare’s Per Person Spending Has Stopped Skyrocketing

Spending per Medicare beneficiary has nearly leveled off over more than a decade — but for unknown reasons. The lower per-person cost could have to do with the Affordable Care Act, fewer heart attacks, or the recent lack of new blockbuster treatments.

In fact, if Medicare spending had grown the way it had for much of its history, federal spending would have been $3.9 trillion higher since 2011, and deficits would have been more than a quarter larger.

The development has had enormous consequences for federal spending. Budget news is often dire, but the Medicare trend has been unexpectedly good, saving taxpayers a huge amount relative to projections. Medicare is growing more slowly than ever, although still more quickly than the rest of the federal budget.

One partial explanation: older Americans appear to be having fewer heart attacks and strokes, the likely result of effective cholesterol and blood pressure medicines that became more widely used in recent years, according to research from Harvard Professor David Cutler and colleagues.

Medicare may even wind up saving money because of Covid-19, because the older Americans who died from the disease tended to have other illnesses that would have been expensive to treat if they had survived, according to an analysis from the Medicare actuary.

“The data shows that any calls to privatize or cut Medicare, or raise the eligibility age, are wrong-headed,” said Richard Fiesta, Executive Director of the Alliance.