Medicare Spending Is Slowing: $9 Billion Windfall for Taxpayers

The movement away from fee-for-service medicine toward accountable care in Medicare may get a boost from fresh numbers from the Congressional Budget Office showing spending on the health insurance program for the elderly slowing dramatically.

The Congressional Budget Office last week issued a surprising report that showed spending on Medicare beneficiaries falling despite the rising number of aging baby boomers and the familiar scenario of increased spending on the budget-busting program year after year.

"On the basis of actual outlays through July, CBO now expects that the growth of net Medicare spending for 2014 will be slower than what the agency anticipated earlier this year," CBO said in "An Update To The Budget And Economic Outlook: 2014 to 2024."

"As a result, CBO has lowered its projection of spending for Medicare by $9 billion for 2014 and a total of $11 billion for the 2015-2024 period," the report adds. "Such revisions primarily stem from lower than expected spending for Part A (Hospital Insurance) services and Part D (prescription drugs)."

Translation: the forces of private health plans and forces integrated into the Affordable Care Act appear to be working. Or at least they aren't driving up spending.

There is evidence that hospital admissions have dipped due to a stagnant economy that caused consumers to delay or avoid elective surgeries. However, it also appears Medicare spending is slowing because of partnerships between the government, health plans, and providers of health care to seniors, as well as cost controls woven into the landmark health law.

Across the board, initiatives that place more risk on doctors and hospitals to perform better and generally include contracts with Medicare Advantage plans are generating savings for the Medicare program.

Earlier this year, for example, the Centers for Medicare & Medicaid Services reported that more than $380 million in savings had been achieved from various value-based arrangements, including "bundled payments" made to specific groups of providers to treat a population of patients or from accountable care organizations. Such ACOs and so-called Pioneer ACOs are umbrella entities that group providers together, rewarding doctors and hospitals for working together to improve quality and rein in costs.