CBO: Why Medicare spending is slowing down

A new report from the Congressional Budget Office (CBO) finds that changes in Medicare payment rates and in beneficiary demand for services account for only one-quarter of the slowdown in Medicare spending between 2000 and 2010.

The reasons for the rest of the slowdown are unclear as it "appears to have been caused in substantial part by factors that were not related to the recession's effect on beneficiaries' demand for services,"  the report says.

The CBO adds the amount that can be attributed to rate changes and demand "is subject to considerable uncertainty; nonetheless, it informs our view that other factors--namely, a combination of changes in providers' behavior and changes in beneficiaries' demand for care that we did not measure--were responsible for a substantial portion of the slowdown in Medicare spending growth."

"Although we did not attempt to quantify the effects of those other contributors to the slowdown," the report adds, "we investigated some ways in which the delivery of medical services changed over the course of the decade as well as some of the factors that might have affected providers' behavior."

The report also attempts to subcategorize possible explanations for the growth in demand, offering such possibilities as changes in age and health status, fallout from the financial crisis, increased use of prescription drugs and changes in supplemental coverage. 

The CBO further theorizes other potential factors, such as changing methods of delivery of care. "For instance," the report says, "providers increasingly treated high-cost beneficiaries in lower-cost sites of care. To the extent that such trends accelerated in the later part of the decade, they would have contributed to the slowdown in spending growth studied here."

The report cautions that, without a full understanding of what caused the slowdown, it is difficult to analyze its longevity.

To learn more:
- here's the CBO report (.pdf)

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