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New CBO Report Shows Medicare Leading the Way on Lowering Costs

Last week, the Congressional Budget Office released a new budget outlook with updated data on expected federal costs of programs including Medicare and Medicaid over the next ten years. According to the CBO, Medicare spending in 2012 grew by only 3% – the lowest rate of growth in over a decade,[1] and a rate much lower than that of the private market.[2]  In fact, the Washington Post notes thatFrom the March 2010 baseline to the current baseline…[CBO] lowered estimates of federal spending for the two programs in 2020 by about $200 billion — by $126 billion for Medicare and by $78 billion for Medicaid, or by roughly 15 percent for each program”.[3]

The new baseline estimates indicate that Medicare is leading the way in controlling costs, and that Medicare has significantly contributed to lowering the nation’s deficit through innovative payment and delivery models as well as reductions in overpayments to private insurance plans under the Affordable Care Act.[4]

CBO’s outlook illustrates that Medicare is not the problem, but rather the solution that policymakers should look to for addressing the real issue of overall health care costs affecting payers system-wide. While many look to slash Medicare and Medicaid in the name of deficit reduction through proposals like raising Medicare’s eligibility age or fragmenting the program through further means-testing, the CBO estimates reveal that such proposals are not rooted in fiscal policy. As the Post points out, “…$200 billion out of [Medicare and Medicaid] is nothing to sneeze at; that’s about double the revenue the government would generate by raising the Medicare eligibility age from 65 to 67.”

The Center for Medicare Advocacy has long maintained that if policymakers are really concerned about strengthening Medicare and reducing the deficit, cutting benefits is the wrong approach – and new polling shows that over 60% of Americans agree.[5]  In fact, 85% of Americans strongly favor one of the Center’s Solutions to reduce the deficit: Requiring drug companies to give the government a better deal on medications for people on Medicare. Whether Congress chooses instead to protect the windfall profits of pharmaceutical companies rather than protecting people living on less than $22,000 a year and rely on Medicare to maintain their health remains to be seen.


[1] Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2013 to 2023, available at
[3] Washington Post, Wonkblog: Three Ways CBO Expects Health Spending to Change. Available at
[4] Center for Medicare Advocacy, Medicare Facts and Fiction: Costs and Spending Edition, available at
[5] Kaiser Family Foundation and Harvard School of Public Health: The Public’s Health Care Agenda for the 113th Congress, available at

February 13, 2013 at 4:20 pm Leave a comment

Beware of “Smoke and Mirrors” Savings

Hospitals Reach Deal with Administration, offering $155 billion in health savings.  (Washington Post, July 7, 2009)

The nation should be careful of healthcare savings that are more “smoke and mirrors” than actual savings through changed medical practices and efficiencies.  As the Washington Post article points out, “most of the savings – about $100 billion – would come through lower-than-expected Medicare and Medicaid payments to hospitals” and “$40 billion would be saved by slowly reducing what hospitals get to care for the uninsured.”  These savings, roughly $140 billion, represent on-going cost-containment efforts by the Centers for Medicare & Medicaid (CMS) and have little to do with any overall industry agreement to change its ways or to delve into a serious analysis of how its operations might be streamlined toward healthcare efficiencies.  The true smoke and mirrors aspect of the hospital industry’s agreement lies in their anticipation of a higher rate structure, under the administration’s yet-to-be-announced public plan, than is currently provided through Medicare.  It is hard to see what the public gets out of this “deal.”

July 8, 2009 at 1:44 pm Leave a comment

Mandating Health Insurance – Hmm: Sounds Good.

The President favors requiring everyone to have health insurance coverage (Washington Post, p. A4, June 4, 2009). That’s a good idea, but how do you get there from here? The conversation is confusing. Employer mandates, individual mandates, subsidies for employers, subsidies for the poor, healthcare exchanges, go figure! What about the CHIP program? And, where will Medicare and Medicaid be in the mix? With employer-based coverage being in a state of flux and the fragility of our economy, including rampant job loss, relying on employer-based coverage seems risky, to say the least. Then there are the many issues of deciding the nature and scope of services and benefits to include in mandatory health insurance packages and how to make sure that mandatory insurance actually yields health care.

The solution: A strong public program, available to everyone, that guarantees health care coverage for all. Hmm, maybe we can get there from here.

June 4, 2009 at 2:57 pm Leave a comment

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