Event Recap: Medicare and Inflation
On July 27, the Committee for a Responsible Federal Budget hosted an event on "Medicare and Inflation." The event featured opening remarks from Josh Gordon of the Committee for a Responsible Federal Budget and an expert panel including Katie Martin of the Health Care Cost Institute who moderated the event along with Arnab Datta of Employ America, Matthew Fiedler of the USC-Brookings Schaeffer Initiative for Health Policy, and Marc Goldwein of the Committee for a Responsible Federal Budget. Panelists discussed the implication of inflation for the Medicare program and health care sector costs.
A video of the full event is available here or below.
Gordon opened by explaining that the intersection between health care and inflation is of immediate importance because the federal government's role in health care can be a fiscal lever available to Congress to complement the work of the Federal Reserve in bringing down high inflation. He noted how inflation impacts health care costs are important because those costs play an outsized role in the growth of the national debt and could impact the impending insolvency of the Medicare Hospital Insurance trust fund.
Members of the panel then gave opening statements. Goldwein noted that the current high levels of inflation have been driven by high demand in the economy in part because of excessive government spending but also because of supply constraints. The Consumer Price Index is up 9.1 percent year over year and up 1.3 percent in June alone. As the Federal Reserve continues to raise interest rates, he explains that deficit reduction should complement the Fed in order to assist in lowering inflation while trying to avoid a recession.
Remarks continued with Fiedler explaining that health care goods and services account for 20 percent of all goods and services. However, health care inflation is low at the moment – in part because Medicare is a major payer for those goods and services and Medicare payment growth has been modest relative to inflation. He noted that the reintroduction of the Medicare sequester has also played a role in holding down Medicare spending.
Datta began his remarks by noting that high inflation is a risk to the recent jobs recovery and that an overcorrection by the Fed can negate that recovery through a recession. Health care is a powerful tool to reduce inflation and avoid the harmful impacts of a recession, especially on lower-income workers.
During the Q&A, Martin asked panelists how they would rank lowering health care costs among other fiscal policy changes to reduce inflation. The panelists largely agreed that it is one of the most direct and easiest legislative changes that might also be the most equitable.
The panel discussion continued by focusing on areas of Medicare spending where experts point to overpayments as the place to target for cuts, including in Medicaid Advantage, post-acute care, site of service differentials, and high prescription drug prices.
Panelists also noted that it will be important to keep the sequester in effect to reduce overall Medicare spending and for Congress to not pursue further bonuses to physician payments.
All panelists agreed that the reconciliation package being debated in Congress would be helpful in the effort to lower inflation if it lowers drug prices. It would reduce the deficit and Medicare spending and produce savings for employers and patients.
The Committee for a Responsible Federal Budget thanks all those who participated and attended the event.