How Much of the Medicare Spending Slowdown Can be Explained? Insights and Analysis from 2014
Introduction
See for example: Orszag, P. R., and P. Ellis. 2007. "Addressing Rising Health Care Costs—A View from the Congressional Budget Office." New England Journal of Medicine 357(19), 1885-87; Orszag, P. R., and P. Ellis. 2007. "The Challenge of Rising Health Care Costs—A View from the Congressional Budget Office." New England Journal of Medicine 357(18), 1793-95; U.S. Government Accountability Office. 2007. "Health Care 20 Years from Now: Taking Steps Today to Meet Tomorrow’s Challenges ", http://www.gao.gov/assets/210/203207.pdf.
Medicare accounts for one-seventh of all federal spending and 3 percent of the nation’s economy. (See Table 1-1 in Congressional Budget Office. 2014. "The 2014 Long-Term Budget Outlook." http://www.cbo.gov/sites/default/files/cbofiles/attachments/45471-Long-TermBudgetOutlook.pdf.
Jacobson, Gretchen, "Medicare and the Federal Budget: Comparison of Medicare Provisions in Recent Federal Debt and Deficit Reduction Proposals," Kaiser Family Foundation, January 13, 2014, https://www.kff.org/medicare/issue-brief/medicare-and-the-federal-budget-comparison-of-medicare-provisions-in-recent-federal-debt-and-deficit-reduction-proposals/.
Kronick, R., and R. Po. 2013. "Growth In Medicare Spending Per Beneficiary Continues To Hit Historic Lows." Assistant Secretary for Planning and Evaluation, http://aspe.hhs.gov/health/reports/2013/medicarespendinggrowth/ib.cfm.
Medicare Trustees. 2014. "2014 Annual Report Of The Boards Of Trustees Of The Federal Hospital Insurance And Federal Supplementary Medical Insurance Trust Funds," http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2014.pdf.
Spitalnic, Paul, Letter to Administrator Tavenner Updating the IPAB Determination, Centers for Medicare & Medicaid Services, July 28, 2014, http://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/Downloads/IPAB-2014-07-28.pdf.
Issue Brief
Roehrig, Charles, Ani Turner, Paul Hughes-Cromwick, and George Miller, "When the Cost Curve Bent — Pre-Recession Moderation in Health Care Spending," New England Journal of Medicine, Vol. 367, No. 7, August 16, 2012, pp. 590-593.
See for example: Dranove, D., C. Garthwaite, and C. Ody. 2014. "Health Spending Slowdown Is Mostly Due To Economic Factors, Not Structural Change In The Health Care Sector." Health Affairs 33(8), 1399-406; Cuckler, G. A., A. M. Sisko, S. P. Keehan, S. D. Smith, A. J. Madison, J. A. Poisal, C. J. Wolfe, J. M. Lizonitz, and D. A. Stone. 2013. "National Health Expenditure Projections, 2012–22: Slow Growth Until Coverage Expands And Economy Improves." Health Affairs 32(10); Levitt, Larry, Gary Claxton, Charles Roehrig, and Thomas Getzen, Assessing the Effects of the Economy on the Recent Slowdown in Health Spending, April 22, 2013. https://www.kff.org/health-costs/issue-brief/assessing-the-effects-of-the-economy-on-the-recent-slowdown-in-health-spending-2/.
See for example: McIntyre, Adrianna, Orszag: It's time for some optimism about health care spending, Vox, June 15, 2014. http://www.vox.com/2014/6/15/5807046/orszag-its-time-for-some-optimism-about-health-care-spending; Cutler, D. M., and N. R. Sahni. 2013. "If Slow Rate Of Health Care Spending Growth Persists, Projections May Be Off By $770 Billion." Health Affairs 32(5), 841-50, http://content.healthaffairs.org/content/32/5/841.full.pdf; Chandra, A., J. Holmes, and J. Skinner. 2013. "Is This Time Different? The Slowdown in Healthcare Spending." NBER Working Paper No. 19700, http://www.nber.org/papers/w19700; Blumenthal, D., K. Stremikis, and D. Cutler. 2013. "Health Care Spending — A Giant Slain or Sleeping?" New England Journal of Medicine 369(26), 2551-57, http://www.nejm.org/doi/full/10.1056/NEJMhpr1310415.
White, Chapin, "Why Did Medicare Spending Growth Slow Down?," Health Affairs, Vol. 27, No. 3, May/June, 2008, pp. 793-802.
Levine, Michael, and Melinda Buntin. 2013. "Why Has Growth in Spending for Fee-for-Service Medicare Slowed?", CBO Working Paper 2013-06, http://www.cbo.gov/sites/default/files/cbofiles/attachments/44513_MedicareSpendingGrowth-8-22.pdf.
Chappel, Andre, Arpit Misra, and Steven Sheingold, Medicare's Bending Cost Curve, Assistant Secretary for Planning and Evaluation, July 28, 2014, http://aspe.hhs.gov/health/reports/2014/MedicareCost/ib_medicost.pdf.
Committee for a Responsible Federal Budget, Temporary Effects Driving Medicare's Slow Growth in 2014, May 13, 2014, http://crfb.org/blogs/temporary-effects-driving-medicares-slow-growth-2014.
Neuman, Tricia, and Juliette Cubanski, "The Mystery of the Missing $1,200 Per Person: Can Medicare’s Spending Slowdown Continue?" September 29, 2014, https://www.kff.org/health-costs/perspective/the-mystery-of-the-missing-1000-per-person-can-medicares-spending-slowdown-continue.
Adler, Loren and Adam Rosenberg, "The $500 Billion Medicare Slowdown: A Story About Part D," Health Affairs blog, October 21, 2014, http://healthaffairs.org/blog/2014/10/21/the-500-billion-medicare-slowdown-a-story-about-part-d/.
Dobson, Al, Gregory Berger, Kevin Reuter, and Joan E. DaVanzo, Do Structural Changes Drive the Recent Health Care Spending Slowdown? New Evidence, February 28, 2014, http://fahpolicy.org/wp-content/uploads/2014/03/Dobson-DaVanzo-Federation-Study.pdf.
In 2008, total Medicare spending was $445 billion and there were 44.4 million beneficiaries (both from CBO’s March 2009 Medicare baseline). CBO projected in 2009 that the number of beneficiaries would grow to 51.9 billion in 2014. We measured average annual rates of growth in Medicare spending per beneficiary on Parts A and B over four historical periods: 2000-2008 (6.4%), 1995-2008 (5.1%), 1990-2008 (6.1%), and 1985-2008 (6.3%). (From the Medicare Trustees. 2014. "2014 Annual Report Of The Boards Of Trustees Of The Federal Hospital Insurance And Federal Supplementary Medical Insurance Trust Funds." http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2014.pdf.) Projected spending in 2014 equals $445 billion*(51.9/44.4)*((1+g )^(2014-2008)), where g equals the historical growth rate. This yields projected spending of $753 billion (g=0.064, 2000-2008), $702 billion (g=0.051, 1995-2008), $740 billion (g=0.061, 1990-2008), and $750 billion (g=0.063, 1985-2008).
Congressional Budget Office, Cost estimate for the amendment in the nature of a substitute for H.R. 4872, incorporating a proposed manager's amendment made public on March 20, 2010, March 20, 2010, http://www.cbo.gov/ftpdocs/113xx/doc11379/AmendReconProp.pdf.
Congressional Budget Office, Estimated Impact of Automatic Budget Enforcement Procedures Specified in the Budget Control Act, September 12, 2011, http://www.cbo.gov/sites/default/files/09-12-BudgetControlAct_0.pdf.
The savings for Parts A, B, and D are calculated by comparing: 1) CBO’s projections in March 2009 of benefit payments in each part of the program (with recovered amounts allocated proportionally, and with Part B benefit payments increased to reflect an “SGR fix”) with 2) actual benefit payments using FY 2014 outlays from the September 2014 Monthly Treasury Report. See U.S. Department of the Treasury, Monthly Treasury Statement of Receipts and Outlays of the United States Government for Fiscal Year 2014 Through September 30, 2014, and Other Periods, http://www.fiscal.treasury.gov/fsreports/rpt/mthTreasStmt/mts0914.pdf.
Loren Adler and Adam Rosenberg have reported that “Part D has accounted for over 60 percent of the slowdown in Medicare benefits since 2011” (See Adler, L., and A. Rosenberg. 2014. "The $500 Billion Medicare Slowdown: A Story About Part D." Health Affairs Blog, http://healthaffairs.org/blog/2014/10/21/the-500-billion-medicare-slowdown-a-story-about-part-d/). Adler and Rosenberg’s analysis differs in two key ways from our analysis. First, to quantify the Medicare spending slowdown, they compare CBO’s March 2011 baseline with CBO’s April 2014 baseline. The March 2011 baseline already incorporates the projected savings in Parts A and B from the ACA. Second, they do not adjust the March 2011 baseline to reflect the anticipated effect of the SGR fixes.
For CBO’s score of the ACA, see Congressional Budget Office. 2010. "Cost estimate for the amendment in the nature of a substitute for H.R. 4872, incorporating a proposed manager's amendment made public on March 20, 2010." http://www.cbo.gov/ftpdocs/113xx/doc11379/AmendReconProp.pdf. The $54 billion in savings is larger than the $42 billion reported by CBO for 2014 for “Medicare and Other Medicaid and CHIP Provisions.” The difference between $54 billion and $42 billion reflects the fact that we are focusing on Medicare spending, whereas CBO’s estimated $42 billion reflects the estimated effect of the Medicare provisions on net outlays, which includes an offset for reduced collections of beneficiary premium payments.
See ACA section 3401.
See ACA sections 3401(e) and 10319(d).
This analysis follows CBO’s general approach of including indirect savings in the Medicare Advantage program in the savings attributed to changes in fee-for-service prices. For example, CBO notes in its 2014 score of the "SGR Repeal and Medicare Beneficiary Improvement Act of 2013" (http://cbo.gov/sites/default/files/cbofiles/attachments/s1871.pdf): “Payments to Medicare Advantage (MA) plans are based on underlying fee-for-service (FFS) costs, so CBO estimates an interaction between changes in FFS spending and MA plan payments. … Most estimates in the preceding table incorporate the effect of changes in FFS spending on MA spending …”
Neuman, Tricia, and Gretchen Jacobson, Medicare Advantage: Take Another Look, May 7, 2014. https://www.kff.org/medicare/perspective/medicare-advantage-take-another-look/.
Medicare Payment Advisory Commission, Medicare Payment Policy, March, 2014.
In 2009, CBO projected that there would be 12 million enrollees in Medicare Advantage plans in 2014, and that Medicare would spend a total of $155 billion on Medicare Advantage, or $12,600 per enrollee. Based on CBO’s most recent projections, actual spending on Medicare Advantage will total $156 billion in 2014, which almost exactly matches the total projected in 2009. That near match reflects two major offsetting factors: enrollment in Medicare Advantage is much higher than was projected in 2009—16 million beneficiaries rather than 12 million—and spending per enrollee is much lower than was projected in 2009—$9,600 rather than $12,600. If CBO has projected that Medicare Advantage enrollment would increase to 16 million in 2014 when estimating the effects of the ACA Medicare Advantage payment reductions, rather than decline to 9 million, CBO’s projected Medicare baseline for 2014 would have been higher, as would their estimates of savings attributable to the Medicare Advantage payment reductions that year; quantifying these effects is beyond the scope of this analysis.
CBO’s 2010 score of the ACA reports that the Medicare provisions would reduce the deficit by $43 billion. That total is smaller than the $54 billion net reduction in Medicare spending. The effect on the deficit is smaller than the effect on spending because the deficit effect includes an offset for reduced premium payments (i.e. “offsetting receipts”).
Congressional Budget Office, Detail on Estimated Budgetary Effects of Title VI (Medicare and Other Health Extensions) of H.R. 8, the American Taxpayer Relief Act of 2012, as passed by the Senate on January 1, 2013, January 1, 2013, http://www.cbo.gov/sites/default/files/cbofiles/attachments/SenateHR8-TitleVI_0.pdf.
Centers for Medicare & Medicaid Services, Competitive Bidding Update—One Year Implementation Update, April 17, 2012, http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/DMEPOSCompetitiveBid/Downloads/Competitive-Bidding-Update-One-Year-Implementation.pdf.
Congressional Budget Office, "Competition and the Cost of Medicare's Prescription Drug Program," July 30, 2014, http://www.cbo.gov/publication/45552; Medicare Trustees, 2014 Annual Report Of The Boards Of Trustees Of The Federal Hospital Insurance And Federal Supplementary Medical Insurance Trust Funds.
Jack Hoadley, "Medicare Part D Spending: Understanding Key Drivers and the Role of Competition," Kaiser Family Foundation, May 2012, https://www.kff.org/health-costs/issue-brief/medicare-part-d-spending-trends-understanding-key/.
Medicare Trustees, 2014 Annual Report Of The Boards Of Trustees Of The Federal Hospital Insurance And Federal Supplementary Medical Insurance Trust Funds, page 105.
Centers for Medicare & Medicaid Services, Medicare Shared Savings Program Performance Year 1 Results, September, 2014, http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/MSSP-PY1-Final-Performance-ACO.pdf.
Health Affairs. 2013. "Medicare Hospital Readmissions Reduction Program."
U.S. Department of Health and Human Services. 2014. "New HHS Data Shows Major Strides Made in Patient Safety, Leading to Improved Care and Savings," http://innovation.cms.gov/Files/reports/patient-safety-results.pdf.
Based on historical data on program payments per discharge and estimates by the Medicare Trustees of increases in prices per discharge, average spending per inpatient hospital discharge is just over $12,000 this year.
The full effects of avoided readmissions on total Medicare spending will depend on spillover effects on services that are substitutes (e.g. emergency department visits), as well as complements (e.g. post-acute rehabilitation services). While the rate of hospital readmissions has declined since 2010, the rate of emergency department visits has increased, as has the rate of “observation stays,” meaning . This suggests that emergency department visits and observation stays might be substituting for at least some of the avoided readmissions, and that savings to the Medicare program might be smaller than $1 billion. But, Gerhardt et al. (2014) report that “our analysis of Medicare claims data does not suggest that the overall reduction in Medicare readmission rates that occurred in 2012 was primarily the result of greater use of outpatient ED visits or observation stays.” (Gerhardt, G., A. Yemane, K. Apostle, A. Oelschlaeger, E. Rollins, and N. Brennan. 2014. "Evaluating Whether Changes in Utilization of Hospital Outpatient Services Contributed to Lower Medicare Readmission Rate." Medicare & Medicaid Research Review 4(1), E1-E13.)
The relevant ACA sections are: productivity adjustments (Sec. 3401), targeted cuts to prices for home health care (Sec. 3131), a new requirement that physicians have a face-to-face encounter before certifying that a patient is eligible for home health care (Sec. 6407), expanded “program integrity” (anti-fraud) activities (Secs. 6402 and 6411), and stiffer penalties Medicare fraud (Secs. 6408 and 10606).
Medicare Payment Advisory Commission, Medicare Payment Policy, March 2014, Chapter 9; http://medpac.gov/documents/reports/mar14_entirereport.pdf.
Department of Health and Human Services, Medicare Fraud Strike Force charges 90 individuals for approximately $260 million in false billing, May 13, 2014, http://www.hhs.gov/news/press/2014pres/05/20140513b.html.
Office of Inspector General. 2012. "CMS And Contractor Oversight Of Home Health Agencies." http://oig.hhs.gov/oei/reports/oei-04-11-00220.pdf.
In 2009, CBO projected that home health spending per enrollee in traditional Medicare would be $732 in 2014. CBO’s most recent projections of home health spending per enrollee in 2014 are $500. When multiplied by 54 million enrollees, the change in home health spending ($500 versus $732) has reduced total Medicare spending by $12.5 billion (this estimate includes the Medicare Advantage interaction).
U.S. Government Accountability Office, Medicare Program Integrity: Increasing Consistency of Contractor Requirements May Improve Administrative Efficiency, July 2013, http://www.gao.gov/assets/660/656132.pdf.
The additional spending from higher enrollment equals $12,000 spending per enrollee multiplied by 1.6 million additional enrollees.
Medicare Payment Advisory Commission, Medicare Payment Policy, March 2009; Medicare Payment Advisory Commission, Medicare Payment Policy, March 2014.
In 2010, after the enactment of the ACA, CBO projected that 18 percent of Medicare enrollees would be in Medicare Advantage in 2014. Based on the most recent Medicare Trustees report, the actual share of enrollees in Medicare Advantage in 2014 is around 30 percent, which is 12 percentage points higher than CBO projected in 2010. The estimated spending impact of higher-than-expected enrollment in Medicare Advantage equals 12 percent (i.e. 30 percent minus 18 percent) of enrollees multiplied by the 6 percent payment gap multiplied by total spending of $580 billion. This estimate is our best approximation of the added Medicare spending due to higher-than-expected Medicare Advantage enrollment; calculating the exact amount would require knowing the counties in which those additional Medicare Advantage enrollees live and the difference between Medicare Advantage and traditional Medicare spending in those counties and for those individual enrollees.
U.S. Department of Health and Human Services. 2012. "National Strategy for Quality Improvement in Health Care."
The Administration describes the Partnership for Patients as “a public-private partnership working to improve the quality, safety and affordability of health care for all Americans.” See Centers for Medicare & Medicaid Services, 2014, "Partnership for Patients," http://innovation.cms.gov/initiatives/partnership-for-patients/.
U.S. Department of Health and Human Services. 2014. "New HHS Data Shows Major Strides Made in Patient Safety, Leading to Improved Care and Savings," http://innovation.cms.gov/Files/reports/patient-safety-results.pdf.
See the rightmost column in Table 7, Dafny, L. S. 2005. "How Do Hospitals Respond to Price Changes?" American Economic Review 95(5), 1525-47; White, C., and N. Nguyen. 2011. "How Does the Volume of Post-Acute Care Respond to Changes in the Payment Rate?" Medicare & Medicaid Research Review 3(1), E1-E22, http://dx.doi.org/10.5600/mmrr.001.03.a01.
He, D., and J. M. Mellor. 2012. "Hospital volume responses to Medicare’s Outpatient Prospective Payment System: Evidence from Florida." Journal of Health Economics 31, 730–43; He, D., and J. M. Mellor. 2013. "Do Changes in Hospital Outpatient Payments Affect the Setting of Care?" Early View, http://onlinelibrary.wiley.com/doi/10.1111/1475-6773.12069/full.
Levin, David C., Vijay M. Rao, and Laurence Parker, "Trends in the Utilization of Outpatient Advanced Imaging After the Deficit Reduction Act," Journal of the American College of Radiology, Vol. 9, No. 1, January, 2012, pp. 27-32. http://www.sciencedirect.com/science/article/pii/S1546144011004844.
White, C., and T. Yee. 2013. "When Medicare Cuts Hospital Prices, Seniors Use Less Inpatient Care." Health Affairs 32(10), 1789–95.
In the market for physician services, the evidence on the effects of price changes on volume is more mixed. An early generation of studies found that Medicare price cuts appeared to increase the volume of services provided (the so-called “volume offset”). For example, see Nguyen, X. N., and F. W. Derrick. 1997. "Physician Behavioral Response to a Medicare Price Reduction." Health Services Research 32(3), 283-98; and Yip, W. C. 1998. "Physician Response to Medicare Fee Reductions: Changes in the Volume of Coronary Artery Bypass Graft (CABG) Surgeries in the Medicare and Private Sectors." Journal of Health Economics 17(6), 675-99. Also a recent study shows evidence of a volume offset in the provision of chemotherapy (Jacobson, Mireille, Tom Y. Chang, Joseph P. Newhouse, and Craig C. Earle, Physician Agency and Competition: Evidence from a Major Change to Medicare Chemotherapy Reimbursement Policy, NBER, July, 2013. http://www.nber.org/papers/w19247). But, most recent studies suggest that the market for physician services operates like a typical market, and that reduced prices for physician services lead to reduced physician labor supply, and reduced volume of physician services provided. For example, see Staiger, D. O., D. I. Auerbach, and P. I. Buerhaus. 2010. "Trends in the Work Hours of Physicians in the United States." Journal of the American Medical Association 303(8), 747-53; and Dunn, A., and A. H. Shapiro. 2012. "Physician Market Power and Medical-Care Expenditures," http://www.bea.gov/papers/pdf/physician_market_power_and_medical_care.pdf.
See for example: Stewart, W. H., and P. E. Enterline. 1961. "Effects of the National Health Service on Physician Utilization and Health in England and Wales." New England Journal of Medicine 265, 1187-94; Enterline, P. 1973. "The Distribution of Medical Services before and after 'Free' Medical Care -- The Quebec Experience." New England Journal of Medicine 289, 1174-78; Bond, A. M., and C. White. 2013. "Massachusetts Coverage Expansion Associated with Reduction in Primary Care Utilization among Medicare Beneficiaries." Health Services Research 48(6pt1), 1826-39. Also, the expansion of coverage when Medicare was established in the 1960s has been linked to an increase in spending on hospital services among the nonelderly; see Finkelstein, Amy, "The Aggregate Effects of Health Insurance: Evidence from the Introduction of Medicare," Quarterly Journal of Economics, Vol. 122, No. 1, 2007, pp. 1-37. That type of positive spending spillover from a coverage expansion may be a historical artifact that does not apply to the current coverage expansions—Medicare’s payments to hospitals at the time the program was established were extremely generous, and supported broad-based expansions in capacity and staffing.
White, C., and J. D. Reschovsky. 2012. "Great Recession Accelerated Long-Term Decline of Employer Health Coverage." National Institute for Health Care Reform, Number 8, Online: http://www.nihcr.org/Employer_Coverage.pdf.
Levine and Buntin, "Why Has Growth in Spending for Fee-for-Service Medicare Slowed?"
American Hospital Association. 2010. "Hospitals Continue to Feel Lingering Effects of the Economic Recession," http://www.aha.org/content/00-10/10june-econimpact.pdf.
McInerney, M. P., and J. M. Mellor. 2012. "State Unemployment In Recessions During 1991–2009 Was Linked To Faster Growth In Medicare Spending " Health Affairs 31(11), 2464-73.
See for example: Song, Z., D. G. Safran, B. E. Landon, M. B. Landrum, Y. He, R. E. Mechanic, M. P. Day, and M. E. Chernew. 2012. "The ‘Alternative Quality Contract,’ Based On A Global Budget, Lowered Medical Spending And Improved Quality." Health Affairs 31(8), 1-10; Grossman, J., H. Tu, and D. Cross. 2013. "Arranged Marriages: The Evolution of ACO Partnerships in California," http://www.chcf.org/~/media/MEDIA%20LIBRARY%20Files/PDF/A/PDF%20ArrangedMarriagesACOsCalifornia.pdf; Newcomer, L. N. 2012. "Changing Physician Incentives For Cancer Care To Reward Better Patient Outcomes Instead Of Use Of More Costly Drugs." Health Affairs 31(4), 780-85; Hussey, P. S., A. W. Mulcahy, C. Schnyer, and E. C. Schneider. 2012. "Bundled Payment: Effects on Health Care Spending and Quality," Agency for Healthcare Research and Quality, Number 208, http://www.effectivehealthcare.ahrq.gov/ehc/products/324/1235/EvidenceReport208_CQGBundledPayment_FinalReport_20120823.pdf.
Snyder, L. 2012. "American College of Physicians Ethics Manual: Sixth Edition." Annals of Internal Medicine 156(1, Part 2), p. 86.
The Good Stewardship Working Group. 2011. "The “Top 5” Lists in Primary Care." Archives of Internal Medicine 171(15), 1385, http://archinte.jamanetwork.com/data/Journals/INTEMED/22524/isa15004_1385_1390.pdf.
White, C., P. B. Ginsburg, H. T. Tu, J. D. Reschovsky, J. M. Smith, and K. Liao. 2014. "Healthcare Price Transparency: Policy Approaches and Estimated Impacts on Spending." West Health Policy Center, http://www.westhealth.org/sites/default/files/Price%20Transparency%20Policy%20Analysis%20FINAL%205-2-14.pdf.
Appendix
Most federal fiscal years include 12 monthly capitation payments, but some years include 13 and others include only 11.
CBO, March 2009 Baseline: Medicare, https://www.cbo.gov/sites/default/files/cbofiles/attachments/medicare.pdf.
As was widely expected in 2009, the physician fee cuts called for under the Sustainable Growth Rate (SGR) formula were overridden each year from 2010 through 2014. Therefore, to calculate CBO’s projected Medicare spending in 2010 through 2014, we added the estimated increase in Medicare spending from overriding the SGR. The spending increase from overriding the SGR was based on the President’s 2009 budget, which proposed to freeze physician fees at the 2009 level, as reported in Congressional Budget Office. 2009. "A Preliminary Analysis of the President's Budget and an Update of CBO's Budget and Economic Outlook." http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/100xx/doc10014/03-20-presidentbudget.pdf. The spending increase reported by CBO includes an offset for changes in Part B premium payments. Therefore, we divided the spending increase reported by CBO by one minus 0.25 (the approximate share of Part B spending financed by beneficiary premium payments).
U.S. Department of the Treasury, Monthly Treasury Statement of Receipts and Outlays of the United States Government for Fiscal Year 2014 Through September 30, 2014, and Other Periods, http://www.fiscal.treasury.gov/fsreports/rpt/mthTreasStmt/mts0914.pdf.