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Slower Healthcare Inflation Seen Easing the Federal Budget Deficit

February 14, 2013
by Mark Hagland
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A Congressional Budget Office report sees short-term growth in federal Medicare and Medicaid spending slowing
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“A sharp and surprisingly persistent slowdown in the growth of healthcare costs is helping to narrow the federal deficit, leaving budget experts trying to figure out whether the trend will last and how much the slower growth could help alleviate the country’s long-term fiscal problems,” The New York Times reported on Feb. 11.

Citing figures released last week by the Congressional Budget Office (CBO), the Times report, by Annie Lowrey, noted that, “In figures released last week, the Congressional Budget Office said it had erased hundreds of billions of dollars in projected spending on Medicare and Medicaid. The budget office,” the report noted, “now projects that spending on those two programs in 2020 will be about $200 billion, or 15 percent, less than it projected three years ago. New data also show overall healthcare spending growth continuing at the lowest rate in decades for a fourth consecutive year.”

The Times report noted that while healthcare economists still do not fully understand what is driving the lower spending trajectory, “[T]here is a growing consensus that changes in how doctors and hospitals deliver healthcare—as opposed to merely a weak economy—are playing a role.” What remains unknown is what the trajectory for healthcare inflation might be several years from now; and that question will of course drive some of the discussion and debate in the U.S. Congress in the coming months, as the nation’s legislature considers how to deal with Medicare and Medicaid spending in the federal budget.

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