No Fiscal Cliff for Medicare, But Expect a Big (Baby) Boom!

Over the past several days much has been made of two recent federal reports that found that the growth of Medicare spending — and all health spending, for that matter — per patient has slowed to a crawl, reversing an earlier trend of growing faster than the nation’s Gross Domestic Product (GDP).

But within the statistics and projections in those same reports is a ticking time bomb known as the Baby Boom generation.

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One of the reports, “Growth in Medicare Spending per Beneficiary Continues to Hit Historic Lows,” was prepared by the U.S. Department of Health and Human Services’ Office of the Assistant Secretary for Planning and Evaluation. The report attributes the slow growth of Medicare-per-patient expenditures to the Patient Protection and Affordable Care Act. According to the report’s authors, these statistics demonstrate that the ACA “has helped to set Medicare on a more sustainable path to keep its commitment to seniors and persons with disabilities today and well into the future.”

But near the end, the report finds that even though growth per beneficiary has slowed, the number of beneficiaries is growing. “The aging of the US population will put strain on the financing of the Medicare program,” the report states. “Although spending per beneficiary is projected to grow at or below the rate of GDP per capita, the number of Medicare beneficiaries is projected to grow at approximately 3 percent annually. As a result, aggregate Medicare spending will account for a growing share of GDP over the next decade.”

For providers, the news is not all bad. Medicare will not be going away, so a larger percentage of the patient population — the ones with the most health issues — will be covered. But lawmakers will be forced to contain that growth, and the easiest way is to reduce reimbursements. This will increase the burden on patient financial services to collect a higher percentage of deductibles and co-pays from Medicare patients while at the same time becoming more efficient and effective collecting from the rest of the patient population.