Perspective:

The US health care spending has grown at rates exceeding the economy’s growth rate, often by at least 2 percentage points per year. It has therefore grown as a share of the gross domestic product (GDP), and proposals for reducing spending growth in Medicare and Medicaid have become prominent parts of the debate over the federal deficit. A goal of current proposals is to reduce the spending growth rate to roughly the GDP growth rate. Evidence from the past decade actually shows that increases in enrollment have contributed greatly to spending growth, and forecasts for the next decade suggest that this trend will continue. Over the past decade, spending growth per enrollee slowed in Medicare and Medicaid, and per-enrollee growth rates in the next decade are projected to be very close to the expected growth in GDP per capita. It appears that rather than pursuing major restructuring of either program, we should continue adopting available strategies to contain costs within the programs’ current structure, especially since many of those implemented in the past decade seem to be working, and many others on the horizon appear promising.