Deficit fetishists are going to have to change their script, as Medicare is turning out to be better and better news for the economy all the time. The Congressional Budget Office released projections on Wednesday for Medicare spending, and they
projected another decline in spending on the program from previous projections.
The changes are big. The difference between the current estimate for Medicare’s 2019 budget and the estimate for the 2019 budget four years ago is about $95 billion. That sum is greater than the government is expected to spend that year on unemployment insurance, welfare and Amtrak—combined. It’s equal to about one-fifth of the expected Pentagon budget in 2019. Widely discussed policy changes, like raising the estate tax, would generate just a tiny fraction of the budget savings relative to the recent changes in Medicare’s spending estimates. […]
In more concrete terms, the reduced estimates mean that the federal government’s long-term budget deficit is considerably less severe than commonly thought just a few years ago. The country still faces a projected deficit in future decades, thanks mostly to the retirement of the baby boomers and the high cost of medical care, but it is not likely to require the level of fiscal pain that many assumed several years ago.
The constant decline in spending continues to surprise analysts, who are narrowing in on its causes. Some of it is in the CBO's data analysis on the economy and demographics for projections—medical spending, like everything else, is tied to the economy. When people can't afford to go to the doctor, they don't. But there are some real changes brought by Obamacare that are also working to reduce spending. Hospitals and providers have changed behaviors, resulting in less expensive care. From more generic drugs being prescribed to shorter hospital stays—encouraged by the law's reforms—people are still getting care but the government is paying less. These are called "technical changes," and account for a 12 percent reduction in the CBO's estimates since 2010, which translates to about $700 billion—"more than budget cutters could save by eliminating the tax deduction for charitable giving or by converting Medicaid into a block-grant program or cutting military spending by 15 percent."
Turning Medicaid into a block grant is the favorite hobby horse of Republicans, and has been a regular feature in Paul Ryan's budgets. Not only is it bad policy that would likely lead to the end of the program, it's simply not necessary. This is kind of wonky stuff that will have a hard time breaking into the overall political narrative, but it's absolutely huge. Lawmakers, particularly Democrats, have been far too quick to absorb the idea pushed by the deficit peacocks that not only is the deficit the most critical policy issue facing them, but also that the only way to deal with it is creating pain by cutting social insurance programs. That kind of thinking is being totally upended with the idea that smart policy changes can reduce spending without hurting the people who rely on the program.
