Will the Recent Slowdown in Health Care Cost Growth Improve Medicare’S Financing Outlook?

Abstract

In recent years US health care spending growth has slowed. Analysts have sought to explain the causes of this slowdown and to understand its implications for Medicare's financial outlook. Some have suggested the slowdown reflects transformational change in the health care sector facilitated by the Affordable Care Act (ACA), possibly lessening the need for further legislation to shore up Medicare finances. Explaining the recent cost slowdown is likely to remain a subject of debate among experts for some time. Regardless of the outcome of that debate, however, the slowdown does not translate into a significant probability that further Medicare reforms can be avoided. Medicare's trust funds are now in weaker condition than projected before the cost slowdown. The cost slowdown preceded the ACA's passage and cannot be principally attributed to it. Going forward, Medicare costs are substantially more likely to be higher than the trustees' current projections than they are to be lower. Importantly, longstanding methodologies for projecting Medicare finances already assumed a substantial, enduring, long-term deceleration in national health cost growth. Nothing about the recent cost slowdown suggests that Medicare's long-term financial future will be more benign than now projected.