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According to the Committee for a Responsible Federal Budget, the U.S. deficit is at its highest level in the last six years and on track to climb from the current $779 million to as high as $1 trillion by the end of this year.1 Last October, Senate Majority Leader Mitch McConnell indicated that he believes cutting Medicare, Medicaid and Social Security benefits is the only effective way to reverse the ballooning trend.2

However, there is some good news on the Medicare front. According to the 2018 Trustees Report, the outlook for Medicare is better than it was 10 years ago.3 Overall health care spending in the United States slowed for the second year in a row. It is likely that Medicare’s finances are benefiting from some of the cost reductions that are happening across the board. For example:4

  • Slower growth in the use and intensity of services in hospitals, clinics and physician offices, which account for 63 percent of health care spending
  • Hospital spending, which accounts for a third of health care spending, grew 4.4% in 2017, a decrease from the 5.6% growth in this category in 2016
  • Outpatient services decelerated
  • Physician and clinical services spending growth dropped to 4.2% in 2017 from 5.6% in 2016
  • Retail prescription drug spending increased by only 0.4% in 2017 compared to 2.3% in 2016, largely due to a decrease in the number of prescriptions dispensed, particularly opioids

Overall, federal health care spending grew 3.2 percent in 2017, down from 4.9 percent in 2016. While utilization may be lower, challenges remain as the cost for medical services is still rising.5

1 Megan Henney. FoxBusiness. Jan. 2, 2019. “How high US deficit could climb in 2019.” https://www.foxbusiness.com/economy/how-high-us-deficit-could-climb-in-2019. Accessed Jan. 7, 2019.

2 Nicole Goodkind. Newsweek. Oct. 16, 2018. “Mitch McConnell Calls for Social Security, Medicare, Medicaid Cuts After Passing Tax Cuts, Massive Defense Spending.” https://www.newsweek.com/deficit-budget-tax-plan-social-security-medicaid-medicare-entitlement-1172941. Accessed Jan. 7, 2019.

3 Alicia H. Munnell and Anqi Chen. Center for Retirement Research at Boston College. October 2018. “An Update on Medicare’s Finances.” http://crr.bc.edu/briefs/an-update-on-medicares-finances/. Accessed Jan. 7, 2019.

4 Evan Sweeney. FierceHealthcare. Dec. 6, 2018. “Health care spending slows for 2nd consecutive year, remains at 18% of GDP.” https://www.fiercehealthcare.com/finance/healthcare-spending-slows-for-second-consecutive-year-remains-at-18-gdp. Accessed Jan. 7, 2019.

5 Ibid.

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