In comments my attention was called to this statistic:
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The NYT took note of the same phenomenon, noting that no one understood why that was happening.
My reaction was this:
Both graphs address the same period; one shows that total costs are falling while the other illustrates that the average cost continues to rise. I’ll leave the interpretation of that to the interested reader.
All I ask is that any decline in total Medicare spending not be used as an argument for increasing Medicare reimbursement rates.
It’s now increasing below the inflation rate which is new. Spending dropped in 2021 but that because it was so high in 2020. If you look at how it increased from 2019-2021 it is less than the inflation rate. The increase from 2021-2022 was also lower than the inflation rate. If it continues to increase at a rate lower than inflation that makes a lot of budget stuff easier.
If you look further back the early 2010s saw very low increases in Medicare spending but inflation was very low. It picked up in the late 2010s but now it’s gone down below inflation. Absent the very bad inflation in Medicare spending we saw in the 80s and early 90s, Medicare inflation has been a percent or two above general inflation. If we had avoided that we would be much better off.
Steve
This is not that mysterious. Congress reduced the physician reimbursement rate by 2% for 2023. Combine that with high inflation and that result should have been expected.
I’ve been saying that for decades. “Cost of living increases” are fallacious when the underlying rate of inflation is very low, healthcare constitutes a large proportion of the economy, and healthcare spending increases at a multiple of the non-healthcare rate of inflation.
My math is weak and boy genius is traveling. How would decreasing reimbursement for 2023 slow down spending in 2021 and 2022?
“and healthcare spending increases at a multiple of the non-healthcare rate of inflation.”
Except that uniquely in 2021 and 2022 it did not for Medicare. It would be good to know why it happened so that maybe we can replicate it. Maybe we can pass a law that say we will cut spending in 2026 and see costs go down in 2024 and 2025.
Steve
Good point. Here’s a follow-up question: why are private health insurance costs expected to increase substantially? I assume it’s a consequence of the reduction in 2023 reimbursement rates.
Follow up on Medicare.
https://www.nytimes.com/2023/09/09/upshot/obamacare-medicare-spending-slowdown.html
In the private sector inflation has not hit that hard yet but insurers are anticipating it will soon so they are increasing premiums. A lot of this is due to labor shortages and increased costs for nurses and support staff who have opted to work for agencies.
Steve