According to an analysis of new Congressional Budget Office data by the Kaiser Family Foundation, Medicare is expected to spend an average of $1,000 less this year than originally projected on each person with Medicare, $11,328. That’s a total of $50 billion less in 2014.
By 2019, projected reductions in Medicare spending are expected to be an average of $2,400 for each person with Medicare, $12,545, down from a projection of $14,319. That means Medicare’s total costs will be $120 billion less than what the budget folks in Washington expected.
It’s still hard to know exactly why Medicare is seeing lower costs than originally expected but there are some theories. For one, unnecessary hospital readmissions are dropping. Health care reform incentivized hospitals to ensure Medicare patients get appropriate care when they are first hospitalized. If they need to be readmitted because of inappropriate care received on their first visit, hospitals are penalized financially.