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The Slowdown in Medicare Spending Growth: Working Paper 2006-08

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  • Chapin White
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    Abstract

    The rate of so-called “excess” growth in Medicare spending per beneficiary has varied widely over the last several decades, and growth has slowed substantially in recent years. (Excess growth is defined as growth beyond the combination of the general rate of economic growth and the rate of change in the age composition among beneficiaries.) The annual rate of excess growth fell from 5.5 percent over the period from 1975 to 1983 to 0.9 percent over the period from 1992 to 2003. Changes in provider payment policies might help explain the observed slowdown. Those changes include the implementation of a prospective payment system for short-stay hospitals, and, more recently, the imposition of mechanisms to control aggregate Medicare physician spending. Possible alternative explanations—increases in managed care enrollment, changes in Medicare cost sharing, and a system-wide spending slowdown—do not account for the slowdown in Medicare spending. The slowdown is of an economically important magnitude and deserves further study.

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    Bibliographic Info

    Paper provided by Congressional Budget Office in its series Working Papers with number 18017.

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    Date of creation: 31 Jul 2006
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    Handle: RePEc:cbo:wpaper:18017

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    1. Weisbrod, Burton A, 1991. "The Health Care Quadrilemma: An Essay on Technological Change, Insurance, Quality of Care, and Cost Containment," Journal of Economic Literature, American Economic Association, vol. 29(2), pages 523-52, June.
    2. Baker, Laurence C., 1997. "The effect of HMOs on fee-for-service health care expenditures: Evidence from Medicare," Journal of Health Economics, Elsevier, vol. 16(4), pages 453-481, August.
    3. Victor R. Fuchs, 1998. "Provide, Provide: The Economics of Aging," NBER Working Papers 6642, National Bureau of Economic Research, Inc.
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