<p>The Widespread Slowdown in Health Spending Growth Implications for Future Spending Projections and the Cost of the Affordable Care Act An Update ACA Implementation—Monitoring and Tracking June 2016 Stacey McMorrow and John Holahan 2 ACA Implemention-Monitoring and Tracking INTRODUCTION In April 2015, we published a report that analyzed the widespread slowdown in health care spending growth leading up to 2014 and the implications for national health expenditure projections and the cost of the Affordable Care Act (ACA).1 We examined six consecutive Centers for Medicare and Medicaid Services (CMS) forecasts of national health expenditures, focusing on the pre-ACA forecast made in February 2010, the ACA baseline forecast made in September 2010, and the 2014 forecast.2 In 2010, CMS estimated that national health expenditures for the years 2014 to 2019 would increase by $577 billion under the ACA. This reflected the increased costs of coverage expansion offset by reductions in Medicare and Medicaid payments. Over the next four years, however, CMS repeatedly reduced its annual forecasts of 2014 to 2019 expenditures. Ultimately, the 2014 forecast suggested that national health expenditures for 2014 to 2019 would be about $2.5 trillion less than the ACA baseline forecast from September 2010. Projections were lower overall and for Medicare, Medicaid, and private health insurance, with some of the reductions explained by policy changes over time, such as the 2012 Supreme Court decision on Medicaid expansion and the Budget Control Act of 2011 (i.e., sequestration). A critical factor in the reduced spending projections over time, however, was the historic slowdown in health spending growth that began in 2008. At the time of the 2014 forecast, the average annual growth rate from 2010 to 2013 was about 3.6 percent compared with the 5.4 percent that had been projected in 2010. This slower growth clearly lowered the level of spending on which later forecasts were based and therefore contributed to reduced spending projections for 2014 to 2019. Unclear, however, is how much slower growth leading up to 2014 informed assumptions about the projected future rate of growth. Although the CMS actuaries did acknowledge the proliferation of high-deductible private health plans and cost-containment efforts in state Medicaid programs as contributors, they mainly attributed the slowdown to the Great Recession and sluggish economic recovery. Consequently, those actuaries assumed that a robust recovery would ultimately lead to returns to higher growth rates in the later years of the forecast. In our earlier report, we discussed several factors beyond the recession, including several ACA provisions, that may have contributed to the health spending slowdown. We also suggested that if these other factors kept spending growth low following economic recovery, then CMS spending projections may continue to fall. Since that report, CMS has released another round of national health spending projections for 2014 to 2024, and additional estimates of health spending growth in 2014 and 2015 have become available through CMS and the Altarum Institute. This brief uses the CMS projections released in July 2015 to update our previous analysis and considers the implications of other recent data for interpreting future spending projections. With support from the Robert Wood Johnson Foundation (RWJF), the Urban Institute is undertaking a comprehensive monitoring and tracking project to examine the implementation and effects of the Patient Protection and Affordable Care Act of 2010 (ACA). The project began in May 2011 and will take place over several years. The Urban Institute will document changes to the implementation of national health reform to help states, researchers and policymakers learn from the process as it unfolds. Reports that have been prepared as part of this ongoing project can be found at www.rwjf.org and www.healthpolicycenter.org. The quantitative component of the project is producing analyses of the effects of the ACA on coverage, health expenditures, affordability, access and premiums in the states and nationally. 3 ACA Implemention-Monitoring and Tracking Table 1. Cumulative Spending Projections for 2014 to 2019 Original 2014 forecast (2014–2019) relative to original ACA baseline Adjusted 2014 forecast (2014–2019) relative to adjusted ACA baseline 2015 forecast (2014–2019) relative to adjusted 2014 forecast 2015 forecast (2014–2019) relative to adjusted ACA baseline $ % change $ % change $ % change $ % change NHE -2538 -10.8% -2672 -11.3% 49 0.2% -2623 -11.0% Medicare -384 -8.4% -518 -10.9% 63 1.5% -455 -9.6% Medicaid -927 -20.3% -927 -20.3% -123 -3.4% -1050 -23.0% Private -688 -8.9% -688 -8.9% 24 0.3% -664 -8.6% OOP -20 -0.9% -20 -0.9% 22 1.0% 2 0.1% Other -519 -11.5% -519 -11.5% 63 1.6% -456 -10.1% Source: Authors’ analysis of Centers for Medicare and Medicaid Services national health expenditure projections. Table Notes: OOP = out-of-pocket. NHE = national health expenditures. Dollar estimates in billions. Original 2014 forecast and ACA baseline included the projected effects of required cuts to physician payment rates under the sustainable growth rate system. Adjusted forecasts reflect alternative scenarios that assume the cuts to physician payments under the sustainable growth rate system will be replaced with rate freezes or small increases. DATA & METHODS This paper compares the most recent CMS forecast released in July 2015 to the 2010 ACA baseline forecast. The 2015 forecast incorporates actual spending data from 2013 and projects spending for 2014 through 2024.3 Importantly, the 2015 forecast also incorporates the Medicare Access and CHIP Reauthorization Act (MACRA), passed in April 2015, that permanently eliminated the sustainable growth rate (SGR) system for setting physician payment rates in Medicare.4 Our earlier work used the “current-law” forecasts for Medicare spending, which included the projected effects of large cuts to Medicare physician payments that were required by the SGR system at the time of each forecast. To be consistent with the new law reflected in the 2015 forecast, we have adjusted the ACA baseline Medicare forecast to assume that the cuts to physician payments under the SGR system would be replaced with a rate freeze.5 We made a similar adjustment to the 2014 forecast used in our earlier report, and these adjustments change two main findings from that report.6 First, when comparing the adjusted 2014 forecast to the adjusted ACA baseline forecast, we now find a decline in projected Medicare spending for 2014 to 2019 of $518 billion compared with our earlier finding of $384 billion (table 1).7 Second, this additional $134 billion decline in Medicare spending is directly reflected in the additional decline in total national health expenditures for 2014 to 2019 when comparing the adjusted forecasts (-$2,672 billion) versus the original forecasts (-$2,538 billion). For simplicity, we omit “adjusted” from future references to the forecasts, but all estimates hereafter use the adjusted forecasts that assume SGR-related cuts to physician payments are replaced with rate freezes or modest increases. 4 ACA Implemention-Monitoring and Tracking Figure 1. National Health Expenditure Projects ($ billions) 2000 4500 4750 4250 4000 2500 2750 3500 3250 3000 2750 2250 2010 2011 2012 2013 2019 2018 2017 2016 2015 2014 3080 3247 3326 4020 4534 4614 Cumulative 2014-2019 Spending 2010 adjusted pre-ACA forecast: $23.2 trillion 2010 adjusted ACA baseline forecast: $23.7 trillion 2015 forecast: $21.1 trillion Difference (2015 - ACA baseline): -$2.6 trillion Source: Authors’ analysis of Centers for Medicare and Medicaid Services national health expenditure projections. Adjusted forecasts reflect alternative scenarios that assume the cuts to physician payments under the sustainable growth rate system are replaced with a rate freeze. 2015 forecast reflects permanent fix under the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015. RESULTS On the whole, cumulative 2014 to 2019 national health spending in the 2015 forecast is $49 billion higher than in the 2014 forecast (table 1). The 2015 forecasts for Medicare, private health insurance, out-of–pocket spending, and other health spending are also slightly higher for the 2014 to 2019 period than in the 2014 forecast. Medicaid spending for 2014 to 2019, however, is now projected to be $123 billion lower than in the 2014 forecast. Despite the modest increase in projected national health spending since the 2014 forecast, however, the 2015 forecast still reflects a decline of $2.6 trillion from 2014 to 2019 compared with the 2010 ACA baseline forecast (figure 1). In the sections that follow, we compare the 2015 forecast to the ACA baseline forecast for each major component of national health spending. Medicare Medicare spending was reduced in the 2010 ACA baseline forecast compared with the pre-ACA forecast because of reductions in payments to Medicare Advantage plans and the reductions in annual payment updates for most institutional providers (figure 2). By 2015, the CMS actuaries predicted that total Medicare spending for 2014 to 2019 would be $455 billion lower than in the ACA baseline forecast. One reason is the Budget Control Act of 2011 (i.e., sequestration), which required Medicare payments for all types of services be reduced 2 percent beginning in April 2013; another reason is the slower-than-expected spending growth between 2010 and 2014. CMS currently assumes spending growth would increase to an average annual rate of 6.3 percent from 2014 to 2019 compared with 4.4 percent from 2010 to 2014 (table 2). This faster growth from 2014 to 2019 is driven by spending per enrollee, which is expected to grow at an average annual rate of 3.1 percent for 2014 to 2019 compared with 1.3 percent for 2010 to 2014 while projected enrollment growth remains stable. Medicaid Medicaid spending under the 2010 ACA baseline forecast was higher than the pre-ACA forecast because of the eligibility expansion (figure 3). Compared with the ACA 2010 pre-ACA forecast 2010 ACA baseline forecast 2015 forecast 5 ACA Implemention-Monitoring and Tracking Table 2. Medicare Spending, Enrollment and Spending per Enrollee Projections, 2014 to 2019 2010 2014 2019 2010–2014 2014–2019 Medicare spending $ billions Cumulative spending Adjusted ACA baseline 537 679 934 3,025 4,744 Average annual growth rate 6.0% 6.6% 2015 forecast 520 617 838 2,834 4,290 Average annual growth rate 4.4% 6.3% Medicare enrollment millions Average enrollment ACA baseline 46.8 52.4 60.5 49 56 Average annual growth rate 2.9% 2.9% 2015 forecast 46.6 52.6 61.2 50 57 Average annual growth rate 3.1% 3.1% Medicare spending per enrollee $ Average spending per enrollee Adjusted ACA baseline 11,479 12,961 15,440 12,211 13,990 Average annual growth rate 3.1% 3.6% 2015 forecast 11,157 11,726 13,686 11,424 12,527 Average annual growth rate 1.3% 3.1% Source: Authors’ analysis of CMS national health expenditure projections. Table Notes: Adjusted forecasts reflect alternative scenarios that assume the cuts to physician payments under the sustainable growth rate system are replaced with rate freezes or small increases. 2015 forecast reflects permanent fix under the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015. Figure 2. Medicare Expenditure Projections ($ billions) 250 750 1,000 500 2010 2011 2012 2013 2019 2018 2017 2016 2015 2014 694 679 617 934 838 1029 Cumulative 2014-2019 Spending 2010 adjusted pre-ACA forecast: $5,087 billion 2010 adjusted ACA baseline forecast: $4,744 billion 2015 forecast: $4,290 billion Difference (2015 - ACA baseline): -$455 billion Source: Authors’ analysis of Centers for Medicare and Medicaid Services national health expenditure projections. Adjusted forecasts reflect alternative scenarios that assume the cuts to physician payments under the sustainable growth rate system are replaced with a rate freeze. 2015 forecast reflects permanent fix under the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015. 2010 pre-ACA forecast 2010 ACA baseline forecast 2015 forecast 6 ACA Implemention-Monitoring and Tracking Figure 3. Medicaid Expenditure Projections ($ billions) 250 750 1,000 500 2010 2011 2012 2013 2019 2018 2017 2016 2015 2014 634 552 503 794 669 896 Cumulative 2014-2019 Spending 2010 pre-ACA forecast: $4,003 billion 2010 ACA baseline forecast: $4,567 billion 2015 forecast: $3,517 billion Difference (2015 - ACA baseline): -$1,050 billion Source: Authors’ analysis of Centers for Medicare and Medicaid Services national health expenditure projections. baseline forecast, projected Medicaid spending for 2014 to 2019 fell by $1,050 billion in the 2015 forecast. This was partly because of the Supreme Court decision in 2012 that made the ACA Medicaid expansion optional for states and significantly reduced enrollment projections. For example, the ACA baseline forecast predicted 2014 Medicaid enrollment of 78.8 million enrollees, but this fell to 66.5 million enrollees in the 2015 forecast after accounting for the Supreme Court decision (table 3). Projected average annual growth in spending per enrollee for 2014 to 2019 also fell between the ACA baseline forecast and the 2015 forecast, from 6.8 percent to 3.3 percent. Private Health Insurance Like Medicaid spending, private health insurance spending projections were higher in the 2010 ACA baseline forecast than in the pre-ACA forecast mainly because of the marketplace expansion (figure 4). But private spending projections for 2014 to 2019 were lower in the 2015 forecast by $664 billion than in the ACA baseline forecast. Much of this decline was driven by slower spending growth between 2010 and 2014 than had been expected in 2010. Contributors to slower growth likely included the sluggish economic recovery as well as lower-than- expected prescription drug spending because of patent expirations and increases in generic drug prescribing. Another likely contributor was a substantial shift toward higher deductibles and cost sharing in private plans, some of which may have been adopted in anticipation of the ACA excise tax on high-cost plans. The average annual growth rate for 2014 to 2019 is currently projected to be 5.4 percent, which is somewhat faster than estimated growth from 2010 to 2014 of 4.3 percent. This uptick in spending growth in the later period is driven primarily by higher projected enrollment growth (table 4). 2010 pre-ACA forecast 2010 ACA baseline forecast 2015 forecast 7 ACA Implemention-Monitoring and Tracking Figure 4. Private Health Insurance Expenditure Projections ($ billions) 750 1,250 1,500 1,000 2010 2011 2012 2013 2019 2018 2017 2016 2015 2014 1065 1020 1005 1361 1329 1467 Cumulative 2014-2019 Spending 2010 pre-ACA forecast: $7,102 billion 2010 ACA baseline forecast: $7,694 billion 2015 forecast: $7,030 billion Difference (2015 - ACA baseline): -$664 billion Source: Authors’ analysis of Centers for Medicare and Medicaid Services national health expenditure projections. Table 3. Medicaid Spending, Enrollment and Spending per Enrollee Projections, 2014 to 2019 2010 2014 2019 2010–2014 2014–2019 Medicaid spending $ billions Cumulative spending ACA baseline 427 634 896 2,569 4,567 Average annual growth rate 10.4% 7.2% 2015 forecast 398 503 669 2,182 3,517 Average annual growth rate 6.1% 5.9% Medicaid enrollment millions Average enrollment ACA baseline 54.9 78.8 80.2 61 79 Average annual growth rate 9.5% 0.4% 2015 forecast 54.3 66.5 75.3 59 72 Average annual growth rate 5.2% 2.5% Medicaid spending per enrollee $ Average spending per enrollee ACA baseline 7,783 8,047 11,175 8,491 9,647 Average annual growth rate 0.8% 6.8% 2015 forecast 7,322 7,568 8,888 7,413 8,111 Average annual growth rate 0.8% 3.3% Source: Authors’ analysis of Centers for Medicare and Medicaid Services national health expenditure projections. 2010 pre-ACA forecast 2010 ACA baseline forecast 2015 forecast 8 ACA Implemention-Monitoring and Tracking 2010 2014 2019 2010–2014 2014–2019 Private health insurance spending $ billions Cumulative spending ACA baseline 845 1,065 1,467 4,613 7,694 Average annual growth rate 6.0% 6.6% 2015 forecast 862 1,020 1,329 4,679 7,030 Average annual growth rate 4.3% 5.4% Private health insurance enrollment millions Average enrollment ACA baseline 189.2 198.1 207.1 191 204 Average annual growth rate 1.2% 0.9% 2015 forecast 186.3 190.6 204.1 188 199 Average annual growth rate 0.6% 1.4% Private spending per enrollee $ Average spending per enrollee ACA baseline 4,466 5,375 7,085 4,832 6,285 Average annual growth rate 4.7% 5.7% 2015 forecast 4,628 5,353 6,512 4,968 5,873 Average annual growth rate 3.7% 4.0% Source: Authors’ analysis of Centers for Medicare and Medicaid Services national health expenditure projections. Table 4. Private Health Insurance Spending, Enrollment and Spending per Enrollee Projections, 2014 to 2019 Out-of-Pocket Spending and Other Health Spending In the 2010 ACA baseline forecast, the CMS actuaries predicted a significant reduction in out-of-pocket expenditures caused by the ACA coverage expansions (figure 5). Subsequent forecasts have varied slightly, most notably because of reductions in the projected effects of the ACA excise tax on high-cost plans. But by 2015, projected out-of-pocket spending for 2014 to 2019 was just $2 billion more than in the 2010 ACA baseline forecast. Finally, CMS estimates a residual category of “other health spending” that includes spending on the Children’s Health Insurance Program, the US Department of Defense and US Department of Veterans Affairs health programs, public health activity, and investments such as new construction and capital equipment. The 2010 ACA baseline forecast projected a small decline in other spending under the ACA (figure 6). By 2015, however, projected spending in the other category fell by $456 billion for 2014 to 2019 compared with the ACA baseline forecast. Most of the reduction was driven by declines in investment spending, perhaps related to the slow economic recovery and anticipation of less demand for new construction and medical devices because of payment constraints in the ACA. Congressional Budget Office (CBO) Projections of Federal Spending Although CMS projects health expenditures by all payers, CBO makes independent projections of ACA-related federal spending as well as federal spending on Medicare and Medicaid (table 5). In 2010, after the passage of the ACA, CBO estimated that exchange subsidies would amount to $464 billion from 2014 to 2019. In its most recent forecast, CBO projects $313 billion, a reduction of 32.5 percent. In its 2010 forecast, CBO projected federal Medicaid and CHIP outlays for the expansion population would be $434 billion from 2014 to 2019 compared with $366 billion in its current forecast, a reduction of 15.7 percent. Small-employer tax credits are also 85 percent smaller than originally projected because of limited use. Consequently, CBO’s projected gross cost of all ACA coverage provisions for 2014 to 2019 has fallen from $938 billion in the 2010 forecast to $686 billion in the 2015 forecast, a reduction of 26.9 percent. 9 ACA Implemention-Monitoring and Tracking Figure 6. Other Health Expenditure Projections ($ billions) 250 700 1,000 550 850 400 2010 2011 2012 2013 2019 2018 2017 2016 2015 2014 648 626 596 878 770 884 Cumulative 2014-2019 Spending 2010 pre-ACA forecast: $4,567 billion 2010 ACA baseline forecast: $4,449 billion 2015 forecast: $4,043 billion Difference (2015 - ACA baseline): -$456 billion Source: Authors’ analysis of Centers for Medicare and Medicaid Services national health expenditure projections. 2010 pre-ACA forecast 2010 ACA baseline forecast 2015 forecast Figure 5. Out-of-Pocket Expenditure Projections ($ billions) 250 400 500 350 450 300 2010 2011 2012 2013 2019 2018 2017 2016 2015 2014 348 344 322 439 415 466 Cumulative 2014-2019 Spending 2010 pre-ACA forecast: $2,438 billion 2010 ACA baseline forecast: $2,237 billion 2015 forecast: $2,239 billion Difference (2015 - ACA baseline): $2 billion Source: Authors’ analysis of Centers for Medicare and Medicaid Services national health expenditure projections. 2010 pre-ACA forecast 2010 ACA baseline forecast 2015 forecast 10 ACA Implemention-Monitoring and Tracking Cumulative Federal Spending 2014-2019 2010 ACA baseline 2016 forecast 2016 forecast relative to ACA baseline $ billions $ billions Difference % Change ACA insurance coverage provisions Medicaid and CHIP outlays 434 366 -68 -15.7% Exchange subsidies and related spending 464 313 -151 -32.5% Small-employer tax credits 40 6 -34 -85.0% Gross cost of provisions 938 686 -252 -26.9% Medicare Gross outlays 4,713 4,185 -528 -11.2% Net outlays 4,044 3,527 -517 -12.8% Medicaid Total federal outlays, excluding ACA expansion population 2,188 1,901 -287 -13.1% Total gross outlays 7,170 6,114 -1,056 -14.7% Source: Authors’ analysis of Congressional Budget Office federal spending projections. Table Notes: In order to compare like budget windows, the 2016 forecast incorporates historical data from previous years projections. The Medicare and Medicaid projections are from their respective 2015 and 2016 baselines. The ACA insurance coverage provision projections are from 2014, 2015, and 2016 since no historical data is included. Table 5. Congressional Budget Office Projections, 2014 to 2019 CBO also currently forecasts a reduction of $528 billion in Medicare mandatory outlays from 2014 to 2019, or 11.2 percent relative to their 2010 forecast. Finally, federal Medicaid outlays for 2014 to 2019 for those not newly eligible under the ACA Medicaid expansion are now projected to be $287 billion lower than in their 2010 forecast, a reduction of 13.1 percent. Thus, although we cannot compare CBO’s specific estimates to those produced by CMS because of differences in the spending categories and other methodological inconsistencies, the patterns generally parallel those in the CMS forecasts over time. That is, current CBO projections are far below those made when the ACA was enacted in 2010. Altogether, federal spending for Medicare, Medicaid, and ACA coverage provisions for 2014 to 2019 are now projected to be $1.1 trillion, or 14.7 percent, below CBO’s 2010 ACA forecasts. CONCLUSIONS Relative to the 2014 forecast, the 2015 CMS forecast includes a relatively modest increase in projected national health spending for 2014 to 2019 of $49 billion. Despite this increase, comparing the 2015 forecast to the 2010 ACA baseline forecast still reveals dramatic declines in spending projections for 2014 to 2019. National health spending is projected to be $2.6 trillion lower than in the 2010 ACA baseline forecast for the same period. Declines in projected 2014 to 2019 spending on Medicare ($455 billion), Medicaid ($1050 billion), private health insurance ($664 billion) and other health spending ($456 billion) since the 2010 ACA baseline forecast continue to be quite large as well. CMS did not attribute any of the reductions in their projections over time for 2014 to 2019 to the ACA.9 They had of course incorporated the law’s significant cost containment provisions in their 2010 ACA baseline forecast. But the ACA could have contributed to the lower 2015 projections in several ways. First, the ACA payment adjustments that began in 2011 seemed to have had a greater effect on utilization than anticipated. Unexpected reductions occurred in Medicare hospital days, outpatient visits, skilled nursing facility days, and advanced imaging between 2010 and 2014.10 Second, lower payment rates in Medicare may have affected payment rates by other payers, with commercial insurers following 11 ACA Implemention-Monitoring and Tracking Medicare in their negotiations with hospitals and physicians.11 Third, Medicare policies, such as financial penalties for hospital readmissions, may have spilled over to other payers. Fourth, premiums in marketplaces are below expectations because of strong competition, intense negotiations over provider payment rates, and narrow networks.12 In addition, CMS has thus far not attributed any cost savings to accountable care organizations, medical homes, or other delivery system reforms that have been proliferating over the past several years. But the presence of such reforms, together with payment reductions in Medicare and dramatically increased cost sharing in private plans, may have heightened uncertainty among providers over the flow of revenues. All of this could have caused providers to make substantial structural changes to adapt to the new environment. If the ACA and other factors discussed above have contributed to slower spending growth in unmeasured ways, then slower growth may persist beyond current projections.13 But if the economy was the primary driver of slower growth, then we should expect a return to faster growth with a robust recovery.14 Researchers at the Altarum Institute have been tracking health spending growth ahead of the official CMS estimates, and they reported increases in spending growth throughout 2014, peaking at 6.2 percent in the fourth quarter; compare this with the average growth of under 4 percent from 2008 to 2013.15 Some interpreted this as a sign that the slowdown in health spending growth had ended, but evidence is growing that this spike was largely caused by the ACA coverage expansion and has already begun to dissipate.16 More recent evidence from the Altarum Institute seems to confirm the temporary nature of the 2014 spike; their researchers reported that spending growth continued to increase through the first quarter of 2015, but by the last quarter of 2015, spending growth had again slowed to below 5 percent. If this persists, even the current CMS forecast could prove too high. CMS projects returns to national health expenditure growth rates of at least 6 percent from 2019 to 2024, but the Altarum Institute’s estimates seem to support the notion that factors beyond the economy have contributed to persistently slower spending growth. If current CMS projections do not fully reflect this pattern, spending projections will continue to fall and it will become harder not to attribute at least some of the sustained cost containment to the ACA. 12 ACA Implemention-Monitoring and Tracking ENDNOTES 1. Holahan J and McMorrow S. The Widespread Slowdown in Health Spending Growth. Washington: Urban Institute, 2015. http://www.urban.org/research/publication/widespread- slowdown-health-spending-growth. Accessed May 26, 2016. 2. Centers for Medicare and Medicaid Services. National Health Expenditure Projections 2009–2019, 2010; Truffer CJ, Keehan S, Smith S, Cylus J, Sisko A, Poisal JA, et al. Health Spending Projections Through 2019: The Recession’s Impact Continues. Health Affairs 2010;29(3):522-29; Centers for Medicare and Medicaid Services. National Health Expenditure Projections 2009–2019 (September 2010), 2010; Sisko AM, Truffer CJ, Keehan SP, Poisal JA, Clemens MK, and Madison AJ. National Health Spending Projections: The Estimated Impact of Reform Through 2019. Health Affairs 2010;29(10):1933-41; Centers for Medicare and Medicaid Services. National Health Expenditure Projections 2013-2023, 2014; Sisko AM, Keehan SP, Cuckler GA, Madison AJ, Smith SD, Wolfe CJ, et al. National Health Expenditure Projections, 2013-23: Faster Growth Expected with Expanded Coverage and Improving Economy. Health Affairs. 2014;33(10):1-10. 3. Centers for Medicare and Medicaid Services. National Health Expenditure Projections 2014–2024, July 2015. https://www.cms.gov/Research-Statistics- Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/ NationalHealthAccountsProjected.html. Updated July 30, 2015.Accessed May 26, 2016; and Keehan SP, Cuckler GA, Sisko AM, Madison AJ, Smith SD, et al. National Health Expenditure Projections, 2014-24: Spending Growth Faster Than Recent Trends. Health Affairs. 2015;34(8):1407–1417. 4. In practice, the Medicare Access and CHIP Reauthorization Act of 2015 included a payment rate freeze for the first six months of 2015, a 0.5 percent increase for the rest of that year, and a 0.5 percent increase for each year from 2016 to 2019. 5. We adjusted both the pre-ACA baseline and ACA baseline forecasts using information provided by CBO on the increase in Part B spending projections that would occur assuming a physician payment rate freeze rather than the required SGR cuts (https://www.cbo.gov/sites/default/files/111th-congress-2009-2010/ dataandtechnicalinformation/health2.pdf and https://www.cbo.gov/sites/default/files/111th- congress-2009-2010/dataandtechnicalinformation/SGR-Menu.pdf). We calculated this spending adjustment as a share of Medicare Part B spending in each year using the CBO forecasts (March 2009 Medicare Baseline https://www.cbo.gov/sites/default/files/51302- 2009-03-Medicare.pdf and August 2010 Baseline https://www.cbo.gov/sites/default/ files/51302-2010-08-Medicare.pdf), and applied the equivalent adjustment to CMS forecasts of Medicare Part B spending (CMS Projected Medicare Part B Expenditures under Two Illustrative Scenarios with Alternative Payment Updates, May 12, 2009; and CMS Projected Medicare Expenditures under an Illustrative Scenario with Alternative Payment Updates to Medicare Providers, August 5, 2010). 6. For the 2014 CMS forecast, we used the “projected baseline” provided by CMS, which used assumptions that were very close to the actual provisions implemented under the Medicaid Access and CHIP Reauthorization Act of 2015 (CMS Projected Medicare Expenditures under Current Law, the Projected Baseline and an Illustrative Alternative Scenario, August 28, 2014, https://www.cms.gov/Research-Statistics-Data-and-Systems/ Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/2014TRAlternativeScenario. pdf). In 2014, the alternative scenario assumed a freeze in 2015 and a 0.6 percent increase for 2016 to 2019. We did not use the CMS illustrative alternative scenarios in earlier years because they generally assumed more generous physician updates than those that were actually implemented in later “doc fix” bills. 7. The additional decline in projected spending reflects the fact that the ACA baseline forecast assumed the effects of adherence to the sustainable growth rate system over a longer period, leading to a more substantial underestimate of Medicare spending than in the 2014 forecast. 8. To compare like budget windows, we have combined data from several reports to get the 2016 forecast because those reports do not include historical projections. The Medicare and Medicaid outlays use the March 2015 baselines combined with the March 2016 to get the full 2014 to 2019 budget window. The cost of ACA insurance coverage provisions use three years of baseline projections because no historical data are included. For 2016 estimates, see Congressional Budget Office’s March 2015 Medicare Baseline: By Fiscal Year. Congressional Budget Office. https://www.cbo.gov/sites/default/files/51302-2015- 03-Medicare.pdf. Accessed May 26, 2016; Congressional Budget Office’s March 2016 Medicare Baseline: By Fiscal Year. Congressional Budget Office. https://www.cbo.gov/sites/ default/files/51302-2016-03-Medicare.pdf. Accessed May 26, 2016; Detail of Spending and Enrollment for Medicaid—CBO’s March 2015 Baseline (By Fiscal Year). Congressional Budget Office. https://www.cbo.gov/sites/default/files/51301-2015-03-Medicaid.pdf. Accessed May 26, 2016; Detail of Spending and Enrollment for Medicaid for CBO’s March 2016 Baseline (By Fiscal Year). Congressional Budget Office. https://www.cbo.gov/sites/default/files/51301- 2016-03-Medicaid.pdf. Accessed May 26, 2016; Federal Subsidies for Health Insurance Coverage for People under Age 65: Tables From CBO’s March 2016 Baseline. Congressional Budget Office. https://www.cbo.gov/sites/default/files/51298-2016-03-HealthInsurance.pdf. Accessed May 26, 2016; Insurance Coverage Provisions of the Affordable Care Act—CBO’s March 2015 Baseline. Congressional Budget Office. https://www.cbo.gov/sites/default/ files/51298-2015-03-ACA.pdf. Accessed May 26, 2016; Insurance Coverage Provisions of the Affordable Care Act—CBO’s April 2014 Baseline. Congressional Budget Office. https://www.cbo.gov/sites/default/files/51298-2014-04-ACA.pdf. Accessed May 26, 2016. For 2010, see CBO’s August 2010 Baseline: Medicare. Congressional Budget Office. https://www.cbo.gov/sites/default/files/51302-2010-08-Medicare.pdf. Accessed May 26, 2016; Douglas W. Elmendorf. Congressional Budget Office Letter to Speaker Nancy Pelosi, March 20, 2010. https://www.cbo.gov/sites/default/files/111th-congress-2009-2010/ costestimate/amendreconprop.pdf. Accessed May 26, 2016; Spending and Enrollment Detail for CBO’s March 2010 Baseline: Medicaid. Congressional Budget Office. https://www.cbo.gov/sites/default/files/111th-congress-2009-2010/ dataandtechnicalinformation/MedicaidBaseline.pdf. Accessed May 26, 2016. 9. Centers for Medicare and Medicaid Services. Analysis of Factors Leading to Changes in Projected 2019 National Health Expenditure Estimates: A Comparison of April 2010 and September 2013 Projections. Baltimore: Centers for Medicare and Medicaid Services, 2013. 10. White C, Cubanski J, and Neuman T. How Much of the Medicare Spending Slowdown Can Be Explained? Insights and Analysis from 2014. Menlo Park, CA: Kaiser Family Foundation, 2014. 11. Clemens J and Gottlieb JD. Bargaining in the Shadow of a Giant: Medicare’s Influence on Private Payment Systems. Working Paper No. 19503. Cambridge, MA: National Bureau of Economic Research, 2013.; White C, Contrary To Cost-Shift Theory, Lower Medicare Hospital Payment Rates for Inpatient Care Lead to Lower Private Payment Rates. Health Affairs. 2013;32(5):935–943; White C and Wu VY. How Do Hospitals Cope with Sustained Slow Growth in Medicare Prices? Health Services Research. 2014;49(1):11–31. 12. Holahan J, Blumberg LJ, and Wengle E. 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Assessing the Effects of the Economy on the Recent Slowdown in Health Spending. Menlo Park, CA: Kaiser Family Foundation, 2013. http://kff.org/health-costs/issue-brief/assessing-the-effects-of-the-economy-on-the-recent- slowdown-in-health-spending-2/. Accessed May 26, 2016. 15. Roehrig C, Turner A, Hughes-Cromwick P, and Miller G. Health Sector Trend Report: March 2015- Expanded Report Covering All of 2014. Washington: Altarum Institute, 2015. http://altarum.org/sites/default/files/uploaded-publication-files/ltarumpercent20RWJFpercent- 20Trendpercent20Reportpercent20Marchpercent202015percent20FINAL_0_0.pdf. Accessed May 26, 2016. 16. Holahan J and McMorrow S. Has Faster Health Care Spending Growth Returned? Washington: Urban Institute, 2015. http://www.urban.org/research/publication/has-faster- health-care-spending-growth-returned. Accessed May 26, 2016; Larner L. Health Affairs Web First: National Health Spending Growth Accelerates in 2014. Health Affairs. 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About the Authors and Acknowledgements Stacey McMorrow is a senior research associate and John Holahan is an Institute Fellow with the Urban Institute’s Health Policy Center. The authors are grateful to Bowen Garrett and Stephen Zuckerman for their comments and suggestions as well as to Patricia Solleveld and Erik Wengle for research assistance. About the Robert Wood Johnson Foundation For more than 40 years the Robert Wood Johnson Foundation has worked to improve health and health care. We are working with others to build a national Culture of Health enabling everyone in America to live longer, healthier lives. For more information, visit www.rwjf.org. Follow the Foundation on Twitter at www.rwjf.org/twitter or on Facebook at www.rwjf.org/Facebook. About the Urban Institute The Urban Institute is a nonprofit, nonpartisan policy research and educational organization that examines the social, economic and governance problems facing the nation. For more informaiton, visit www.urban.org. Follow the Urban Institute on Twitter www.urban.org/twitter or Facebook www.urban.org/facebook. More information specific to the Urban Institute’s Health Policy Center, its staff, and its recent research can be found at www.healthpolicycenter.org. </p>