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CMS Actuary: Reform Law Would Push Spending Up By 1%

Janice Simmons, for HealthLeaders Media, April 26, 2010

National health spending would increase by $311 billion—up by about 1%, from 2010 through 2019 under the new healthcare reform legislation, according to a report from the Centers for Medicare and Medicaid Services Chief Actuary Rick Foster. This amount—greater than the CMS actuary’s amount projected last December—reflects the greater use of healthcare services by those being newly covered, lower prices paid to providers for those being covered by Medicaid, and lower payments for Medicare beneficiaries, Foster said.

At the same time, the reform legislation would expand coverage to an additional 34 million uninsured residents at an additional cost of $828 billion over 10 years. However, Medicare, Medicaid, and immediate reform provisions are expected to result in net savings $577 billion; this would leave a net overall cost of $251 billion, before the increase from the excise tax on high-cost employer-based insurance and other revenue provisions.

Whether the figures reported by the actuary support or challenge reform legislation costs seems to depend on what side of the aisle the observer is on.

Rep. David Camp (R-MI), the ranking minority member of the House Ways and Means Committee, said Friday that the "report confirms Americans' worst fears about the healthcare law: It will increase health spending, increase federal control over our healthcare system, cut benefits for millions of seniors and jeopardize access to care for seniors and the disabled."

However, new House Ways and Means Chairman Sander Levin (D-MI) said that the report "illustrates the value of the investment we are making with health reform. Any increase provided in spending pays tremendous dividends, expanding coverage to an additional 10% of Americans . . . with less than a 1% increase in national health expenditures."

Levin added that the report does not look at all aspects of reform. Additional analyses from the Congressional Budget Office and Joint Committee on Taxation "show that health insurance reform will reduce the federal deficit."

The report did contain sobering information, stated by Foster in earlier memos on the reform legislation, that "Medicare productivity adjustments" to keep Medicare costs down over the next 10 years could become "unattainable." With this trend, 15% of hospitals and other Medicare Part A providers could become unprofitable, causing them to stop treating Medicare beneficiaries.

The report also found that:

  • Payment cuts for Medicare Advantage plans called for under the new reform measures could result in enrollment decreases in the MA program by as much as 50%. Those beneficiaries who drop their Advantage plans and obtain traditional Medicare coverage could end up paying more out of pocket costs.
  • An estimated 16 million people will be receiving their health coverage by 2019 through health exchanges created under the new reform law.
  • Of the estimated $828 billion 10-year net increase in federal expenditures related to the new law, roughly half ($410 billion) can be attributed to expanding Medicaid coverage to adults living in households with incomes 133% below the federal poverty level.
  • Based on the estimated savings for Medicare Part A, the assets of the Hospital Insurance trust fund would be exhausted by 2029—rather than the previous projected year of 2017.
  • Some businesses may stop providing health benefits for workers since those workers could likely "become enrolled in the expanded Medicaid program" or receive "subsidized coverage through the health exchanges" created by the new reform law.
  • Approximately 2.8 million are expected to participate in the Community Living Assistance Services and Support long-term care program within three years, according to the report. However, the program faces a "very serious risk" that the problem of adverse selection will make the "CLASS program unsustainable."

Janice Simmons is a senior editor and Washington, DC, correspondent for HealthLeaders Media Online. She can be reached at jsimmons@healthleadersmedia.com.

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