The high costs of Medicare and Medicaid are owed to increased
enrollment, not to out-of-control growth in healthcare spending in
the programs, a report from the Urban Institute found.
Spending growth in both programs is not far off the spending
targets called for by economists and politicians, John Holahan and
Stacey McMorrow of the Urban Institute wrote in the report, which
was released online Thursday.
The authors acknowledge, however, that Medicare and Medicaid put a
huge strain on the federal budget.
"The fact that expenditure growth in both programs is largely
driven by enrollment growth does not mean that overall expenditures
do not place heavy burdens on the federal budget; hence, the need
to look for policy options for reducing costs in both programs,"
Several Republican solutions to reduce the rate of growth in
spending plan to turn Medicare into a premium-support program and
Medicaid into a block grant program. But those plans wouldn't do
anything to bring down overall costs, the study authors wrote.
Rather, they would only shift costs -- in the case of Medicare, to
seniors, and in the case of Medicaid, to the states.
Holahan and McMorrow examined spending in Medicare and compared it
with private insurance. They found that although Medicare's
spending growth rates are higher than those in the private sector,
it's only because Medicare enrollment has been increasing, and the
number of people with private health insurance has declined.
In fact, they found, per-enrollee expenditure growth in Medicare
has been slightly below that of private plans.
Overall spending in private health insurance is projected to grow
at about the same rate as in Medicare. This likely will occur
despite the fact that Medicare enrollment will far outpace that of
private coverage, the study authors said.
Per-enrollee spending in Medicare will grow by 2.7% each year,
compared with 4.9% spending growth per enrollee in private plans,
suggesting that Medicare does a reasonable job of keeping
per-enrollee growth in check, they argued.
Meanwhile, from 2011-2020, enrollment in Medicare is expected to
increase by 3% annually, while private insurance enrollment is
expected to rise by 0.8% per year, according to figures from the
Centers for Medicare and Medicaid Services that were cited in the
Enrollment in Medicaid, meanwhile, will greatly increase because of
the Affordable Care Act's expansion of the program to an estimated
16 million additional low-income people starting in 2014.
Per-enrollee costs will grow by about 4% a year, which is just
slightly above per-capita GDP growth, the study authors said.
Economists and others have called for a slowdown in health spending
so it doesn't surpass the GDP, plus 1 percentage point. The GDP
grew at an annual rate of about 2.1% from 2006-2010 and is expected
to pick up to a rate of 4.8% each year from 2011-2020.
That neither Medicare nor Medicaid per-enrollee spending is much
above projected growth in the GDP is proof that the programs aren't
"out of control" as detractors allege, wrote Holahan and
"These findings suggest a need for continued vigilance in
monitoring Medicare and Medicaid spending growth, but do not
support an argument for major restructuring of the two programs,"