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Keith Wilson
08-28-2014, 10:25 AM
As long as I can remember, Medicare costs have been a rapidly-increasing part of the federal budget, and a large contributor to future deficit projections. Over the long term, they looked like a very big problem. Demographic changes we can't do anything about, particularly baby-boomers aging. However, spending per person has also been increasing rapidly, driven by the same factors that have increased the cost of heath care for everybody. This is not necessarily bad - living longer and healthier is a very good thing, but it's still a budget problem.

http://4.bp.blogspot.com/-x63MlWhjs5Y/UCqi3kp5hLI/AAAAAAAAFzY/LxcdhB2hBgo/s1600/annual-medicare-spending-per-beneficiary-1966-2010.png

Well, things have changed. The CBO projections for Medicare future spending per person have been declining for six years, and now show them holding roughly constant over the next ten years. Here's an excellent chart, (http://www.nytimes.com/2014/08/28/upshot/medicare-not-such-a-budget-buster-anymore.html?abt=0002&abg=0&_r=0) but I can't insert it in the post. Yes, they're long term projections, which aren't always accurate, but the change is dramatic. Some of it is a result of more intelligent practice of medicine, some the result of the ACA, but one way or another, its a Very Big Deal, and highly encouraging news.

John of Phoenix
08-28-2014, 10:43 AM
Every year for the last six years in a row, the Congressional Budget Office has reduced its estimate for how much the federal government will need to spend on Medicare in coming years. reds will call it "The Death Panel Dividend".

That is one slick chart.

Hot Air
08-28-2014, 10:45 AM
Health Spending Slowdown Is Mostly Due To Economic Factors, Not Structural Change In The Health Care Sector

David Dranove (http://content.healthaffairs.org/search?author1=David+Dranove&sortspec=date&submit=Submit)1 (http://content.healthaffairs.org/content/33/8/1399.abstract?=right#aff-1),
Craig Garthwaite (http://content.healthaffairs.org/search?author1=Craig+Garthwaite&sortspec=date&submit=Submit)2 (http://content.healthaffairs.org/content/33/8/1399.abstract?=right#aff-2),* (http://content.healthaffairs.org/content/33/8/1399.abstract?=right#corresp-1) and
Christopher Ody (http://content.healthaffairs.org/search?author1=Christopher+Ody&sortspec=date&submit=Submit)3 (http://content.healthaffairs.org/content/33/8/1399.abstract?=right#aff-3)

+ (http://content.healthaffairs.org/content/33/8/1399.abstract?=right#) Author Affiliations


1David Dranove is the Walter McNerney Professor of Health Industry Management at the Kellogg School of Management, Northwestern University, in Evanston, Illinois.
2Craig Garthwaite (c-garthwaite@kellogg.northwestern.edu) is an assistant professor of mangement and strategy at the Kellogg School of Management.
3Christopher Ody is a research assistant professor of health enterprise management at the Kellogg School of Management.



↵ (http://content.healthaffairs.org/content/33/8/1399.abstract?=right#xref-corresp-1-1)*Corresponding author


AbstractThe source of the recent slowdown in health spending growth remains unclear. We used new and unique data on privately insured people to estimate the effect of the economic slowdown that began in December 2007 on the rate of growth in health spending. By exploiting regional variations in the severity of the slowdown, we determined that the economic slowdown explained approximately 70 percent of the slowdown in health spending growth for the people in our sample. This suggests that the recent decline is not primarily the result of structural changes in the health sector or of components of the Affordable Care Act, and that—absent other changes in the health care system—an economic recovery will result in increased health spending.

John of Phoenix
08-28-2014, 10:50 AM
...we determined that the economic slowdown explained approximately 70 percent of the slowdown in health spending growth for the people in our sample.Certainly not my experience.

Keith Wilson
08-28-2014, 10:53 AM
Hot Air, that study's not about Medicare, but overall heath care spending (as far as I can tell - anything but the abstract's behind a paywall, I think) . First, Medicare is to a considerable extent insulated from the effects of the recession, since it's a tax-financed program and most of those receiving benefits are retired. Second,the CBO's spending projections have actually gotten lower as the economy has recovered. Not relevant, and contradicted by data.

John of Phoenix
08-28-2014, 10:55 AM
Exactly.
But the analysts at the Congressional Budget Office say the economy is playing a negligible role (http://cbo.gov/sites/default/files/cbofiles/attachments/44513_MedicareSpendingGrowth-8-22.pdf) in what’s happening in Medicare, meaning that they’re more confident that the practice of medicine really is changing. And those changes, if they persist, will do more to reduce the federal deficit than nearly any policy option budget cutters talk about.

Flying Orca
08-28-2014, 11:10 AM
That might be Keith's best chart evar. A chart-topper? :D

Keith Wilson
08-28-2014, 11:35 AM
It's a superb chart, although I just found it, rather than made it. Tufte would be proud (http://www.edwardtufte.com/tufte/). I just wish I could post it.

Flying Orca
08-28-2014, 11:46 AM
I have to read Tufte one of these days. Speaking of reading, how are you getting on with Piketty? I'm back into it, albeit not terribly far... I have the sense that if the world actually listens, this could be more important than Marx.

Too Little Time
08-28-2014, 12:00 PM
The CBO is always interesting.

They put out a forecast of the budget deficit. Good news: Down next year also. Bad News: Up ever after. Almost $1 trillion in 2024.

What does that have to do with the Medicare spending? The chart shows only half of Medicare. It ignores Medicare income. Still spending more than it takes in. Average spending per beneficiary is about 10 times what I pay for Medicare as a beneficiary. I should be paying a lot more or those with jobs should be paying a lot more. Or both.


I looked at the interesting graph no one has posted. Whenever there are changes one needs to explain what caused the changes. I did not see an explanation, but I did not look hard. What is troubling is there are substantial changes in the forecasts over a short period of time. Further there is a dip that really needs some attention paid to it.

Keith Wilson
08-28-2014, 12:03 PM
. . . how are you getting on with Piketty?Haven't mustered the courage yet. I agree with you that it could be one of the books that change the world. I'm in a play this fall (link here (http://www.arboretum.umn.edu/WalkingPlay.aspx)) - just the chorus, not acting, God help us - which is taking up a lot of time.


I did not see an explanation, but I did not look hard. You can follow the links to the original CBO report, which has as much of an explanation as mere mortals can come up with for a very complicated phenomenon.

Arizona Bay
08-28-2014, 12:11 PM
It's a superb chart, although I just found it, rather than made it. Tufte would be proud (http://www.edwardtufte.com/tufte/). I just wish I could post it.



Here ya go.
That's one very fine chart! :D

http://i216.photobucket.com/albums/cc125/nirgal2/Screenshot2014-08-28at90607AM_zpsa6e9723f.png

John Smith
08-28-2014, 12:14 PM
I find it fascinating that the right never accepts new facts. They hold to their beliefs under all circumstances.

Too Little Time
08-28-2014, 12:22 PM
You can follow the links to the original CBO report, which has as much of an explanation as mere mortals can come up with for a very complicated phenomenon.[/COLOR]

There was a reason why I did not look that hard. In fact, I had glanced at the original report prior to the original post and did not find it compelling reading.


But as I said they are spending more than they are taking in. And that is the only important issue for me.


I do enjoy the my personal return on my Medicare premium.

John Smith
08-28-2014, 12:24 PM
Given that Medicare and Social Security are payroll deductions, why is no one pointing out that raising the minimum wage increases revenue to these two programs?

Keith Wilson
08-28-2014, 12:29 PM
Medicare and Social Security are both paid for by quite regressive income taxes. Just figured I'd point that out.

Too Little Time
08-28-2014, 12:32 PM
Medicare and Social Security are both paid for by quite regressive income taxes. Just figured I'd point that out.

I did get the original report and the only model information about Medicare is as follows:



Medicare and Medicaid. CBO reduced its estimate of outlays
for the government’s two largest health care programs
by $89 billion over the 2015–2024 period because of
revisions to the economic forecast. Under current law,
payment rates for most services in the fee-for-service
sector of Medicare (such as hospital care and services
provided by physicians, home health agencies, and skilled
nursing facilities) are subject to automatic updates. Those
updates are tied to changes in the prices of the labor,
goods, and services that health care providers purchase.
CBO’s current projections for the prices of goods and
services related to medical care are slightly lower, on balance,
over the 2015–2024 period than they were in the
agency’s previous forecast, as are its current projections
for labor compensation per hour over the same period.
Consequently, CBO anticipates that payment rates for
Medicare will be slightly lower than what the agency forecast
in April, a change that reduces projected outlays by
$49 billion (or less than 1 percent) over the 2015–2024
period. In the Medicaid program, lower prices for medical
services and labor than CBO previously projected are
also expected to reduce spending slightly—by a total of
$40 billion (or about 1 percent) between 2015 and 2024

More or less worthless.

I did observe that in 2024 Medicare will be spending about $1 trillion vs. income of $200 billion.

Flying Orca
08-28-2014, 12:35 PM
I'm in a play this fall (link here (http://www.arboretum.umn.edu/WalkingPlay.aspx)) - just the chorus, not acting, God help us - which is taking up a lot of time.

That looks awesome! Of course I was immediately diverted by the guy playing smallpipes, and had to go check out his website... :D

Keith Wilson
08-28-2014, 12:43 PM
Of course I was immediately diverted by the guy playing smallpipes . . . The fellow with the very impressive beard? That's Dick Hensold, the music director and the guy composing most of the original stuff. I hadn't realized he played pipes.

Canoeyawl
08-28-2014, 01:13 PM
Hmmm... I probably picked it up from my sister, who lives in Birmingham, AL.

Shirley, it's not

Flying Orca
08-28-2014, 01:25 PM
The fellow with the very impressive beard? That's Dick Hensold, the music director and the guy composing most of the original stuff. I hadn't realized he played pipes.

Scads of pipes, and a bunch of whistle and flutey thingies too. Oddly enough he doesn't appear to play what some would consider the definitive smallpipes: uilleann.

David W Pratt
08-28-2014, 01:37 PM
About 6 mo ago, NEJM published a very interesting article on the economics of drug development. Twenty years ago cardiovascular drugs were the girls everyone wanted to dance with, now, not so much. There are a lot of good CV drugs that have gone off patent and are available very inexpensively. Now big Pharma is looking at cancer, and orphan diseases. Case in point soforobir, or whatever it is called for hepatitis C. Eighty-four thousand a patient, but it is a cure.