Four years ago Medicare was projected to exhaust its trust fund in 2016. Payroll taxes are used to pay Medicare Part A spending but there are times that payroll taxes alone won’t cover the cost the government then dips into the Medicare Trust Fund to pay the difference. The trust fund is composed of excess payroll taxes plus earned interest. The trust fund is now projected to remain solvent until 2030. Health care spending has slowed but no one can really explain why and it’s even harder to explain why it’s slowed as much as it has.
Here’s an example of just how much the spending has slowed. In 2010 the National Commission on Fiscal Responsibility and Reform issued a proposal for deficit-reduction. Their recommendations included limiting health care spending to 6.3% of GDP in 2021. For health care providers, 6.3%, compared to the latest projections by CMS would be a huge pay hike!
A lot of people want to take credit for slower health care spending but credit is due providers. The health care delivery system is becoming more efficient. Hospitals are designed to save people and hospitals have realized that they must save themselves as well. Hospitals and health care providers have changed the way they do business the health care delivery system is improving and becoming more efficient. The Federal Government often looks as decreasing spending by decreasing payment. Payment reform has just about run its course because you can only reduce payment to the point the people still have incentive to provide service. Its time for payment policy to reward efficiency.