The impact of policy changes, long-term forecasting on Medicare spending
The Medicare program has experienced significant changes that make long-term financial forecasts difficult to trust when making policy decisions. Instead, policymakers should focus on containing the program's costs today, according to a brief from Commonwealth Fund.
In 2003, federal officials projected Medicare spending, which included only Parts A and B, to account for 4.7 percent of the nation's gross domestic product (GDP) in 2030, and 8.5 percent by 2070.
However, projections changed last year. In 2016, spending for Medicare, Medicaid and other healthcare programs, including health insurance subsidies offered through federal exchanges, will reach 5.3 percent of the GDP. Additionally, Medicare costs, including part D, are expected to amount to 4.9 percent of the GDP and 6.6 percent in 2070, notes the brief.
The aforementioned alterations stem from the impact of legislation and policy changes. The addition of Part D tacked on substantial costs to Medicare immediately--the new program was expected to add 2 percent to the GDP share of Medicare by 2030 and 3.6 percent by 2070.
Yet other factors, such as the adoption of certain blockbuster drugs in the early 2000s, led Medicare trustees to revise their projections, adds the brief. The 2008 estimate, for instance, was more than 2 percentage points of GDP below the 2005 estimate at the end of the forecast period.
Further, the effects of the Affordabel Care Act on Medicare spending are apparent in a comparison of the 2008 and 2010 forecast estimates. The ACA led trustees to extend the projected trust fund depletion date by 12 years. The law also affected changes to the formula for increasing hospital payment rates from year to year--specifically, the changes decreased the anticipated share of Medicare in GDP by 3.7 percent for 2070, according to the brief.
In conclusion, the Commonwealth Fund notes that predicting future healthcare costs is "an inexact science, at best," and that "long-term forecasting uncertainty should make policymakers and beneficiaries cautious about dramatic changes to the program in the near term."
- here's the brief