CBO revises estimates for growth in government healthcare spending downward

In an update to its April forecast, the non-partisan Congressional Budget Office (CBO) said it now expects Medicare spending to be $49 billion less from 2015 to 2024 than it expected it to be back in April. It also predicted Medicaid spending would be $40 billion less than it thought it would be in its earlier report.

While a combined nearly $90 billion less in spending is notable, compared to the total cost of Medicare and Medicaid, it is only around a 1 percent drop in spending over the next decade. Still, for healthcare organizations trying to advance legislation related to government healthcare spending, the continued prediction of a tempering in the rapid rise in annual spending on healthcare is helpful. The American Medical Association (AMA), for one, knows that its efforts to get a permanent repeal of the sustainable growth rate (SGR) formula for calculating Medicare physician payments passed rather than yet another temporary fix depends to a great extent on how much the CBO will say a permanent repeal will cost. That cost “score” relates directly to the CBO’s estimates for overall Medicare cost growth.

The CBO attributed its change in how much it thinks Medicare and Medicaid will cost over the next decade to a slight lowering in the prices of goods, services and labor related to medical care through 2024. Medicare and Medicaid rates are updated automatically to reflect changes in prices of labor, goods and services, so if those don’t go up substantially, neither do reimbursement rates.

It also lowered its projection of 2014 spending for Medicare by $9 billion because actual spending on Part A (hospital care) and Part D (prescriptions) was lower-than-expected in July.