Medicare report shows Obamacare is bending the cost curve

The 2014 Medicare Trustees Report has just been released, and it shows that the program is on noticeably sounder financial footing than it was just a year ago. One of the biggest signs of this is that the projected depletion date of the Hospital Insurance (Part A) Trust Fund has been pushed back by four years just since last year’s report.

Indeed, Sarah Kliff points out that Part A actually spent $600 million less in 2013 than in 2012, even though it insured 1.6 million more people. As she emphasizes, the big news in this is that per capita Medicare Part A spending has been falling. This is a great sign that there is forward movement in controlling the actual cost of care.


Source:, link above

This is a big deal because not only are Baby Boomers like myself inching towards Medicare eligibility in large numbers, but hospitals and other providers (unfortunately, these two groups are merged in OECD statistics) account for most of the excess of US health care spending compared to other industrialized nations. In fact, comparing the United States to Canada, specifically, I found that payments to providers made up 85% of the per capita cost difference between the two countries.

Moreover, as Kliff points out, even when you include Part B and Part D into the calculation, Medicare’s per capita cost showed no increase in 2013. Zero.

Indeed, if you want to see a very graphic demonstration in the change in the cost curve, Louise Sheiner and Brendan M. Mochouk of the Brookings Institute (h/t Matt Yglesias) have just what you’re looking for.

Source: Brookings Institute, link above

Yes, in just five years, the estimated federal health expenditure has dropped by more than 2 percentage points of GDP by 2035, what would be a difference of $320 billion per year today.

Of course, the Patient Protection and Affordable Care Act cannot take all the credit for this improvement. But, as the Washington Post reported, the law “is slowing payments to Medicare Advantage” and, as also mentioned here, the penalty for hospitals with high re-admission rates has produced a substantial fall in the 30-day re-admission rate, from about 19% in 2011 to less than 18% in 2013. With better care, fewer re-admissions means lower costs.

Thus, while no phenomenon this complex can have a single cause, it is clear that Obamacare is having an impact beyond insuring 10.3 million uninsured, working as designed to improve health outcomes and reduce costs.

Cross-posted from Middle Class Political Economist.