Spending per Medicare beneficiary has nearly leveled off over more than a decade.
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, according to an Upshot analysis. The difference is more than could be saved by raising the eligibility age for Social Security or converting Medicaid into a block grant, controversial proposals raised by legislators concerned about the federal debt.
It’s so much money that almost no major legislation passed during this period comes close in scale. Even some major deficit reduction proposals, like the one known as Simpson-Bowles, aren’t much bigger. The Trump tax cuts cost an estimated $2 trillion over 10 years. The recent deficit reduction deal passed by Congress will save a relatively modest trillion dollars in comparison. A new Medicare policy that will allow it to negotiate on the prices of some prescription drugs is expected to save just under $100 billion over a decade.
Why has Medicare spending per beneficiary increasing at a lesser rate? I would suggest two reasons.
1. Benefits have been cut steadily and significantly, shifting cost to individuals and away from Medicare. In 2013, the Part A hospital admission copay was $1,184. Today, it’s $1,600. A 35% increase. The daily copay after 60 days confinement in 2013 was $296. Today, it’s $400. Another 35% increase. In 2013, the Part B annual deductible was $147. Today, it’s $226. A 54% increase. In 2013 the standard Part B premium was $104.90. Today, it’s 164.90. A 57% increase.
2. Medicare Advantage has attracted a lot more seniors over the past ten years. 2013 about 28% of Medicare-eligible seniors were enrolled in Medicare Advantage. Today, that number is 50%. At first, MA was likely attracting healthier seniors. But it’s harder to make that case when 50% of the Medicare eligible population has enrolled in MA.
Those are significant and obvious factors. Is there a more significant yet less-obvious factor I’m missing?
Medicine is expensive when you are old. Shifting seniors onto HMOs that slow down and eliminate care will eliminate costs too!
One more thought. Seniors aging in to Medicare status may be healthier in 2023 than they were in 2013. That’s just a guess, although there are studies indicating the answer may be Yes. Here’s one
https://www.mdpi.com/1660-4601/20/3/2665
Personally I am going to hold the applause.
a. The number of Americans covered by Medicare went from about 47 million in 2010 to about 62 million in 2022.
b. Spending per beneficiary went from about $12,000 in 2010 to about $18,000 in 2010.
The Times article cited here only said that the rate of growth had slowed. Maybe it did, but big deal. The total burden has certainly grown faster than our economy, and I suspect it has grown a lot faster than tax revenues.
“The Times article cited here only said that the rate of growth had slowed.”
Good point, Bob. Slowed from what to what?
I’m estimating unsubsidized Part A plus Part B premiums of between $14,000 and $15,000 pppy. That’s a long way from total cost (“spending”) of $18,000 pppy.
https://www.cms.gov/newsroom/fact-sheets/2023-medicare-parts-b-premiums-and-deductibles-2023-medicare-part-d-income-related-monthly
“Spending per beneficiary went from about $12,000 in 2010 to about $18,000 in [2022?].”
Bob do these numbers include Part D costs? Is 2022 (my guess) the correct endpoint?
A 35% increase over ten years works out to almost exactly 3% increase annually. A 57% increase over ten years is 4.6 percent annualized.
The full picture is likely a combination of growth in both number of beneficiaries and in cost per beneficiary. Using Bob’s figures (I assume the $18,000 per beneficiary was for 2022 and not 2010), we have 2.3% annual growth in number of beneficiaries, compounded by 3.4% inflation per beneficiary. The total spending increase for 12 years is 98%, or 5.85% annualized.
Bob, please check your numbers. I think the current unsubsidized Part A plus Part B premiums are about $14,000 – $15,000 per person per year. ($506 Part A plus $725 Part B per person per month).
https://www.cms.gov/newsroom/fact-sheets/2023-medicare-parts-b-premiums-and-deductibles-2023-medicare-part-d-income-related-monthly
(This article states the full Part A premium for 2023 is $506 pppm. The Part B standard premium is $164.90, which applies for 93% of all enrollees. So the average would be higher than the standard premium, let’s say 10% higher, or $181.40 pppm. It’s my understanding Part B enrollee premiums are still set at about 25% of the total Part B cost which means the a full 2023 Part B premium is about $725 pppm.)
If the annual Medicare cost (“spending”) is actually $18,000 per person per year, it would mean CMS knowingly underpriced original Medicare in 2023.
🤷♂️
The New York Times article did state that Medicare spending per beneficiary had an actual decline over the last 10 years.
I went to several sources online that showed actual increases, just like Bart described. My two sources were Becker’s Payment Index and USA Facts.
I am not going to dig further, but suffice it to say I remain skeptical of the Times on this one.