CBO Medicare Forecast Accuracy

According to a N.Y. Times editorial, the Congressional Budget Office has consistently underestimated costs savings from a variety of institutional changes to Medicare.  For instance:

Medicare enacts the prospective payments system (PPS) for reimbursing inpatient hospital stays.

  • The CBO projected total Medicare spending will rise to $60 billion in 1986.
  • Actual Medicare spending in 1986 was only $48 billion.

Medicare begins paying skilled nursing facilities and home health care services a set fee per patient.

  • The CBO projected a 9.1% reduction in Medicare spending.
  • The actual savings turned out to be 50 percent greater in 1998 and 113 percent greater in 1999 than the budget office forecast.

The Medicare Modernization Act created Part D prescription drug coverage.

  • The CBO projected that spending on the drug benefit would be $206 billion.
  • Actual spending was nearly 40 percent less than that.

HT: GoozNews

1 Comment

  1. The Medicare Program: When Medicare was instituted in 1965, there was no Congressional Budget Office. Instead, in 1967 House Ways and Means analysts estimated the cost of the program. Medicare, they predicted, would cost $12 billion in 1990. (1) They were wrong—by a staggering factor of 10. The actual spending in 1990 was $110 billion. (2) And Medicare costs continue to skyrocket. Through the first 9 months of 2009, Medicare has cost taxpayers $314 billion and that price tag continues to grow by 10%.

    Medicare Part A: In 1965, the House Ways and Means Committee estimated that Medicare Part A, the hospital insurance part of the Medicare program, would cost $9 billion in 1990. (4) Once again, they were wrong. The actual cost of Part A in 1990 was $67 billion. (5) In 1994, the analyst responsible for the severe underestimate admitted that even when accounting for inflation, “the actual [Part A] experience was 165% higher than the estimate.

    Medicare Home Care Benefit: In 1988, the projected 1993 cost of the Medicare Home Care Benefit was $4 billion. (7) The actual 1993 cost was $10 billion.

    Social Security: When the Social Security Act of 1935 was being debated in Congress, the cost projections for the program extended all the way to 1980. At that time, it was estimated that the federal government would pay out $4 billion in Social Security payments in 1980. (9) In reality it paid out a staggering $108 billion.

    End Stage Renal Disease (ESRD) Program: Congress passed entitlement legislation that provided kidney dialysis for citizens suffering from ESRD in 1972. It was predicted that the program would cost taxpayers $100 million in 1974.11 The estimates were off and the program ended up costing $229 million in that year.

    The Medicaid Disproportionate Share Hospital (DHS) Program: The Medicaid DHS Program is used by states to aid hospitals that treat a high number of Medicaid and uninsured patients. In 1987, Congress estimated that the cost the program would be $1 billion in 1992.13 The actual cost was 17 times larger than the congressional estimate. Medicaid DHS cost taxpayers $17 billion in 1992.

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