NCPA - National Center for Policy Analysis

Medicare Growth Slows, But System Still In Trouble

January 12, 1999

Medicare spending grew by just 1.5 percent last year, the smallest increase since the program started in 1965, according to government data. While the slower rate of growth may add a few years to the life of the Medicare trust fund, immense new costs are expected after 2010.

Experts say the slowdown reflects congressional curbs on payments to hospitals and home health-care agencies, and the impact of efforts to reduce fraud.

  • In the last decade Medicare spending rose by an average of $12.8 billion -- or 10 percent -- a year.
  • But in 1998, it grew just $3.1 billion -- to a total of $213.6 billion.
  • The number of Medicare beneficiaries grew last year by slightly more than 1 percent -- to 39 million.
  • Meanwhile, costs of private health insurance plans increased 4 percent on average last year, with an increase of 7 percent predicted for this year, according to data from the consulting firm of Towers Perrin.

The Medicare trust fund had been expected to lose $4 billion in 1998, but instead it posted a surplus of nearly $1 billion. The trust fund's revenues, mostly from payroll taxes, were $2 billion higher than expected -- thanks to the strong economy -- and spending was $3 billion less than forecast by the Congressional Budget Office.

Medicaid spending rose last year by 5.9 percent, to $101 billion. The health-care program for poor people would have spent even more, experts say, had it not been for the decline in welfare rolls, which contributed to a decline in the number of Medicaid beneficiaries.

Source: Robert Pear, "Medicare Growth in '98 Was Slowest Since Plan's Start," New York Times, January 12, 1999.


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