by Charles Blahous
Hoover Institution
January 28, 2014
Of late there has been a vigorous public debate over the significance of a recently-observed slowdown in the rate of US healthcare cost growth. Some have suggested that this cost growth slowdown may reflect transformative changes in the healthcare sector that could lead to improved Medicare finances, possibly even rendering further program reforms unnecessary. Unfortunately, the voicing of these hopes reflects a misunderstanding of the methodology underlying current Medicare projections. When these methods are fully understood, it becomes clear that despite the recent cost slowdown, Medicare faces substantial financial challenges that are best corrected sooner rather than later, and that Medicare costs are much more likely to be higher than current projections than lower.

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