CBO: Physician payments, utilization rates slow Medicare spending

Medicare spending per person will slow down over the next decade, partly due to beneficiaries who are getting younger and using fewer services, according to a new monthly budget review from the Congressional Budget Office.

The CBO estimated spending will grow at an average of 1.5 percent year between 2014 and 2014, well below the 4 percent spending growth between 1985 and 2007.

It attributed the slower growth in spending to three factors under existing law, including lower payments to doctors through the sustainable growth rate (SGR) formula and Affordable Care Act payment constraints, according to related comments. However, the CBO noted that federal health officials will likely modify ACA payment systems as well as the SGR formula.

The Senate Finance Committee's plan to replace the troubled SGR formula with a new payment formula for physician Medicare payments will cost $138 billion over the next decade, the CBO warned earlier this month.

A slowdown in the quantity and intensity of healthcare services provided per beneficiary, which will continue for several years across all types of services, beneficiaries and major regions, will influence the Medicare spending slowdown, according to the CBO comments.

Moreover, the CBO projected that by 2024, the number of Medicare beneficiaries will jump by more than a third, as about 60 percent of baby boomers will be older than age 65. More beneficiaries turning 65 means a lower average age of Medicare beneficiaries--and a lower average spending for that group.

The relation between Medicare and healthcare spending rates can lead to distortions when the program overpays for healthcare services, FierceHealthFinance previously reported. For example, the program can lead to perverse incentives to provide some services, has broad pricing disparities in some parts of the country and sometimes relies on faulty data provided by physicians and other providers to set prices.

For more:
- here's the CBO review and comments