Medicare and Medicaid Spending Has Increased 1/3 More than Private Spending

Both programs' costs per capita have increased by about 1/3 more than private spending over a period of almost four decades (1970 to 2007), according to analysis by my colleague Jeffrey H. Anderson. The primary reason that Anderson's conclusions differ from those of others (such as Professor Jacob Hacker of the University of California, Berkeley) is that others examine only spending by 3^rd-party payers (either private or government) and ignore out-of-pocket costs (which are all private).

Anderson's analysis drew criticism from the New York Times' Gardner Harris (via private correspondence) who argued that the conclusion was "idiotic" because people over 65 consume more medical services than those under 65, so it's understandable that their costs have increased faster. Fair enough, as Anderson admitted in private conversation with me. However, Anderson rejected Harris' advice that he stop writing about health policy because (according to Harris) he doesn't know anything about it. (In fact, Anderson was an advisor to former U.S. Health & Human Service Secretary Michael Leavitt.)

Could the faster growth in Medicare be related to something special about elderly patients? Anderson executed a similar analysis of spending growth in Medicaid between 1970 and 2007.  (The Medicaid population is primarily under 65, like those with private insurance.) He discovered almost exactly the same result: Medicaid spending per capita has increased by about 1/3 more than private spending. And this is despite lower quality of care for those with Medicaid coverage!

(Anderson also created one of the six computer rankings used by college football's Bowl Championship Series to help decide who will play in college football's National Championship Game. So far, nobody at the New York Times' sports page has tried to prevent him from writing about that.)

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