For decades, runaway Medicare spending was the story of the federal budget.

Now, flat Medicare spending might be a bigger one.

Something strange has been happening in this giant federal program. Instead of growing and growing, as it always had before, spending per Medicare beneficiary has nearly leveled off over more than a decade.

The trend can be a little hard to see because, as baby boomers have aged, the number of people using Medicare has grown. But it has had enormous consequences for federal spending. Budget news often sounds apocalyptic, but the Medicare trend has been unexpectedly good for federal spending, saving taxpayers a huge amount relative to projections.

Some of the reductions are easy to explain. Congress changed Medicare policy. The biggest such shift came with the Affordable Care Act in 2010, which reduced Medicare’s payments to hospitals and to health insurers that offered private Medicare Advantage plans. Congress also cut Medicare payments as part of a budget deal in 2011.

In a recent letter to the Senate Budget Committee, economists at the Congressional Budget Office described the huge reductions in its Medicare forecasts between 2010 and 2020. Most of those reductions came from a category the budget office calls “technical adjustments,” which it uses to describe changes to public health and the practice of medicine itself.

Older Americans appear to be having fewer heart attacks and strokes, the likely result of effective cholesterol and blood pressure medicines that became cheap and widely used in recent years, according to research from Professor Cutler and colleagues. And drug makers and surgeons haven’t developed as many new blockbuster treatments recently — there has been no new Prozac or angioplasty to drive up spending. (Medicare is currently barred by statute from covering the new class of expensive anti-obesity drugs.)

Parts of the health system appear to have become more efficient, as medical providers have been more cautious about adopting new therapies without much evidence, and more care has shifted outside hospitals into cheaper settings.

If Medicare spending had grown the way it had for much of its history, federal spending would have been $3.9 trillion higher since 2011, and deficits would have been more than a quarter larger, according to an Upshot analysis. The difference is more than could be saved by raising the eligibility age for Social Security or converting Medicaid into a block grant, controversial proposals raised by legislators concerned about the federal debt.

$3.9 trillion is …
85% All federal pandemic relief

1.8x Wars in Iraq and Afghanistan (military spending)

2.4x All federal student loan debt

3.5x War in Iraq (military spending)

5x All military spending in one year

6x Walmart revenue FY23

14x Veterans spending in one year

18x Salaries of all public school teachers in one year

27x Food stamps (SNAP) in one year

46x Homeland security spending in one year

161x NASA spending in one year

Those savings have affected Congress’s appetite for other budgetary choices. Medicare itself might look very different if it had been consistently busting the budget. In 2011, near the beginning of the trend, congressional Republicans were talking seriously about changing the very structure of Medicare by converting it into a private voucher program to constrain its future cost. Mitt Romney’s presidential platform in 2012 featured such a plan. Proposals of that sort have fallen out of favor in recent years.

Medicare is growing more slowly than ever, but still more quickly than the rest of the federal budget. If the slowdown per beneficiary ends, it will strain the Medicare trust fund and drive up the federal debt — and may dominate the Washington policy conversation again. That means the uncertainty about the future has high stakes.

“I used to call this the trillion dollar question,” Professor Buntin said. “But now it’s more than a trillion dollars.”