Medicare costs fell this year for the first time ever because of congressional budget cuts and a crackdown on fraud. Medicare spending normally increases by about 10 percent a year as the program struggles to keep pace with the growing elderly population and rising healthcare costs. Most of the drop can be attributed to cuts in provider payments imposed by Congress in 1997, said Marilyn Moon, a health economist with the Urban Institute, a public trustee of the Medicare Trust Fund. But she said some signs also indicate providers are being more careful in their billing practices as a result of several criminal indictments of hospital officials accused of defrauding Medicare. Hospitals now appear to be less likely to seek higher Medicare payments based on misdiagnoses of patients, Moon said.
Most experts expect the spending dip to be temporary because the elderly population is growing.