Trends in and Factors Contributing to the Slowdown in Medicare Spending Growth, 2007-2018

After decades of rapid increase, Medicare per-beneficiary spending growth was historically low in the period leading up to the passage of the Affordable Care Act. In the years immediately following the legislation, Medicare expenditure growth slowed even further.

To evaluate factors contributing to the slowdown in Medicare per-beneficiary spending growth.

In this cross-sectional study, expected spending growth for 2012 to 2015 and 2016 to 2018 was predicted holding payment rates and population characteristics constant. By contrasting predicted and actual spending growth during these periods, the contribution of population vs payment factors to the Medicare spending slowdown was determined. Analyses included all Medicare fee-for-service beneficiaries aged 65 years and older, ranging from 30 to 35 million beneficiaries annually between 2007 and 2018. Data analyses were conducted from January 2018 to August 2018 and updated with new data in June 2021.

The main outcome included annual growth in total per-beneficiary spending. The roles of payment rate changes and differences in the Medicare population over time were considered, including demographic characteristics and numbers of chronic conditions.

Between 2008 to 2011 and 2012 to 2015, the adjusted annual Medicare Parts A and B per-beneficiary spending growth rate declined from 3.3% to -0.1%. From 2016 to 2018, the mean annual Medicare spending growth rate rose relative to the previous period but remained lower than in the baseline period at 1.7% per year. This slowdown extended across all sectors within Parts A and B, except for physician-administered drugs offered under Part B. Changes in payment rates (including sequestration measures) and beneficiary characteristics explained 44% of the difference in overall per-beneficiary spending growth between 2007 to 2011 and 2012 to 2015, and 63% between 2007 to 2011 and 2016 to 2018.

In this cross-sectional study of trends in spending growth per Medicare beneficiary aged 65 years or older, results suggested that Medicare payment policy, including sector-specific payment rate changes and sequestration, will be a critical determinant of whether the Medicare spending growth slowdown persists.