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Thursday, January 10, 2013

Projected Medicare Spending

Via an email from Austin Frakt with the subject "should we worry a lot about Medicare growth?," and the answer in the text "It doesn't seem like it. Massively demographically driven. A bit more revenue and it's fixed for a long time." [Remember that projected health care cost growth is the main source of worry about future debt problems, and hence the driving force behind the push from deficit hawks for spending cuts and tax increases, well spending cuts anyway, the so-called deficit hawks are not so fond of tax increases which betrays their true motives.]:

Medicare growth

Chart of the day: Projected Medicare spending, by Austin Frakt: The vertical axis is percent of GDP. “Excess cost growth” means in excess of the rate of GDP growth. The chart is from a new ASPE report by Richard Kronick and Rosa Po. Description of OACT’s alternative scenario is here, beginning on page 12 (PDF). Note that in addition to assuming a perpetual doc fix, it also assumes “a gradual phase-down of the productivity adjustments [about which, see Figure 1 here] and the elimination of the IPAB requirements.” Given these, is an excess cost growth totaling three-quarters of a percentage point of GDP over two decades a lot?
UPDATE: Link to and quote from the OACT’s alternative scenario

Update: Austin adds a clarification:

I'm not sure I buy my own statement that we only need a bit more revenue. The demographics are costly. The real message is that there is nothing much we can do about it. Cutting beneficiaries or benefits amounts to a cost shift, and is probably net cost increasing, system-wide. So, we must spend the demographically-driven amount. We then just need a bit more to deal with health care cost inflation. One would like to reduce that to zero, but a modest increase won't kill us, and certainly not quickly.

    Posted by on Thursday, January 10, 2013 at 10:24 AM in Budget Deficit, Economics, Health Care | Permalink  Comments (37)


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