Good News on Health Care Costs and the Budget

The biggest driver of the “we must cut the national debt now, now, now” is the expectation that the cost of medical services (and hence the cost of Medicare) will escalate rapidly. But that argument is being undercut by new estimates from the CBO:

Here’s some good news on the fiscal front: projected Medicare spending over the 2011-2020 period has fallen by more than $500 billion since late 2010 — based on a comparison of the latest Congressional Budget Office (CBO) projections with those of August 2010. …

CBO has reduced its projections of Medicare spending in response to a pattern of very low spending growth in the past three years. … Medicare spending growth has slowed even more than costs in private health insurance, according to Standard & Poor’s and Medicare’s actuary. Although some of the slowdown stems from the recession, CBO Director Douglas Elmendorf and other experts have concluded that a substantial part reflects structural changes in the health care system. Professional associations, hospitals, and doctors are taking steps to curb costly and ineffective procedures and treatment. …

The deficit hawks want to hurry and cut spending now. Their goal, after all, is smaller government and lower taxes on the wealthy needed to support it. Thus, they need to get the cuts in place before people figure out that they’ve been misled about the immediacy of the problem — the scary projections are down the road, not tomorrow — and that the problem is not as big as we thought.

(And who the hell cares what Bowles and Simpson think? I certainly don’t. But apparently someone cares, because even though they couldn’t get the committee they headed to agree on their previous budget plan, the unofficial plan they released was treated as official by the media. Now they are back in the news again with a another plan — sanctioned by nothing but their own egos — that tries to move the budget discussions more in the direction of what the GOP desires. Please just go away.)

About Mark Thoma 243 Articles

Affiliation: University of Oregon

Mark Thoma is a member of the Economics Department at the University of Oregon. He joined the UO faculty in 1987 and served as head of the Economics Department for five years. His research examines the effects that changes in monetary policy have on inflation, output, unemployment, interest rates and other macroeconomic variables with a focus on asymmetries in the response of these variables to policy changes, and on changes in the relationship between policy and the economy over time. He has also conducted research in other areas such as the relationship between the political party in power, and macroeconomic outcomes and using macroeconomic tools to predict transportation flows. He received his doctorate from Washington State University.

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