Peter Orszag, the former OMB Director for President Obama, and Loren Adler, the Research Director at the Center for a Responsible Federal Budget (CRFB), just had a fascinating conversation on twitter about the future cost of Medicare spending. Given the importance of Medicare spending on the budget, the spending trajectory is of utmost importance to the US’s fiscal future.
Adler tweeted out a link to a post from March 2013 that debunked the following graph, which shows that if Medicare spending grows at the at the same pace over the next 70 or so years as it has in recent years, then contrary to common perceptions, Medicare WON’T swallow the budget whole.
However, Adler and CRFP do not believe that using the last five years of Medicare cost growth as a future projection is useful.
Orszag thinks otherwise.
Here’s their conversation:
Here Orszag is referring to the fact that most seniors have extra coverage on top of Medicare, also known as medigap coverage. Adler is positing that seniors may have cut back on health care during the past few years due to the recession, leading to lower overall costs.
Orszag’s response is that seniors’ health consumption should not have changed much because 1) most have low out-of-pocket costs and wouldn’t have financial difficulties affording health care and 2) for many seniors, social security makes up a large portion of their income so their incomes would have fallen less during the recession.
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