Medicare costs: How long can the good news go on?

Medicare turned 49 years old last week, and the program celebrated with some good financial news for seniors: Premiums will not rise in 2015 for the third consecutive year.

The question now: How long can the good news persist? Worries about Medicare’s long-range financial health continue, but for now low healthcare cost inflation will translate into a monthly premium of $104.90 next year for Part B (outpatient services), according to the Medicare trustees. Meanwhile, the Centers for Medicare & Medicaid Services (CMS) says the average premium for a basic Part D prescription drug plan will rise by about $1, to $32 per month.

The Part B premium has been $104.90 since 2012 – except for 2011, when it actually dropped by about $15, to $99.90. The moderation is good news for seniors, since premiums are deducted from Social Security checks. Beneficiaries will keep all of next year’s Social Security cost-of-living adjustment, which likely will be about 1.7 percent.

Meanwhile, the average Part D premium has been $30 or $31 since 2011. That’s because of a dramatic shift to cheap generic drugs, and innovation by plan providers competing for customers.

Medicare spending reflects our overall health economy – and the big picture is that the United States does not have effective controls on spending growth. Healthcare outlays have quadrupled since the 1950s as a percentage of gross domestic product, to 17.7 percent in 2011. What’s more, our spending is more than double any other major industrialized nation, according to the Organization for Economic Cooperation and Development.

And research published this month by Health Affairs, a leading health policy and research and journal, credited 70 percent of the recent spending slowdown to the slack economy. Absent further changes in the structure of our healthcare system, the researchers expect higher healthcare inflation to resume as the economy improves.