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Federal Spending on Healthcare - 7/29/14

The growth in federal spending on healthcare will continue to decline as a proportion of the overall economy according to a recent report supplied by the nonpartisan Congressional Budget Office.  The budget office stated in its annually produced 25-year forecast that federal spending on major healthcare programs would amount to 8 percent of gross domestic product by 2039, one-tenth of a percentage point lower than its previous projection.  With this latest revision, the Congressional Budget Office has now reduced its 10-year estimate for spending by Medicare, Medicaid and other health programs by 1 point two three trillion dollars starting in 2010, the year in which the Affordable Care Act took effect. 

As indicated by the New York Times, one of the principal drivers behind these estimates is the growing belief among some analysts that the federal government may be able to sustain a low growth rate of payments to deliverers of healthcare in line with requirements established by the Affordable Care Act.  That’s because there is a body of evidence indicating that hospitals and other providers may be able to achieve significant productivity gains and restrain growth in their costs of delivering care.

Anirban Basu, Chariman Chief Executive Officer of Sage Policy Group (SPG), is one of the Mid-Atlantic region's leading economic consultants. Prior to founding SPG he was Chairman and CEO of Optimal Solutions Group, a company he co-founded and which continues to operate. Anirban has also served as Director of Applied Economics and Senior Economist for RESI, where he used his extensive knowledge of the Mid-Atlantic region to support numerous clients in their strategic decision-making processes. Clients have included the Maryland Department of Transportation, St. Paul Companies, Baltimore Symphony Orchestra Players Committee and the Martin O'Malley mayoral campaign.