Health reform proponents got another round of bad headlines today, as the chief actuary for the Centers for Medicare and Medicaid Services released a report saying that the new law will increase costs. According to an AP story by Ricardo Alonso-Zaldivar, the report is “a worrisome assessment for Democrats,” showing that while cost savings could come sometime after 2020, there is little hope of reducing spending in the next ten years. This sounds pretty bad, right?
Well, it is – if you consider it in a vacuum. The truth is the actuary who wrote the report, Richard S. Foster, authored a nearly identical report released January 8, 2010. Some of his figures changed in the interim – he wrote about the Senate bill in January and this week’s report includes changes made by the reconciliation package that altered the Senate bill – but overall, Foster’s assessment is the same.
The health reform law will increase overall spending in the near future because more people will have insurance and therefore access to medical care. Those who are now going without care because of cost will, post-implementation of reform, seek care, insurance or Medicaid card in hand. Reductions in Medicare reimbursements to providers may cause some to limit the Medicare patients they accept; future cuts to Medicare reimbursements called for in the bill may never happen due to political pressure; the long-term care insurance program created by the law may be unsustainable. This is all important, truthful information and provides a worthy counter-balance to those celebrating the health reform law’s less contentious implications. But it’s worth stressing what this report is not – surprising new information that was kept under wraps during the health reform debate. For instance, I wrote a story back in December about the potential pitfalls of the long-term care program.
Ezra Klein, who supports health reform, says he thinks “the report makes health-care reform look pretty good.” I don’t know if I’d go that far, but Klein does point out a few more things to consider when evaluating Foster’s report – and news coverage of it:
The Congressional Budget Office’s estimates look at the deficit. CMS is looking at total national health expenditures. This often confuses people into thinking that there’s conflict between the two sets of numbers when there isn’t: CBO says that federal spending is going to go up to pay for the coverage expansion, but that savings and revenue will go up by even more, leading to a net reduction in the federal deficit.
CMS is looking only at the spending side. And here’s what it finds: In 2019, implementation of the Affordable Care Act will reduce the ranks of the uninsured by 34 million people and increase nation health expenditures by 1 percent.
One percent.
And that 1 percent is actually 1 percent and falling: When the legislation is fully implemented in 2016, the spending increase will be 2 percent. But cost controls kick in over those years and bring it down to 1 percent. Assuming the trend holds, the second decade will see national health expenditures fall below what spending would’ve been if the bill hadn’t passed. So that’s the bottom line of the report: We’re covering 34 million people and come 2019, spending is expected to be one percentage point — and falling — above what it would’ve been if we’d done nothing.
The bottom line is that no one knows for sure if health reform will “bend the curve” of increasing medical spending. The law will experiment with cost controls that economists and health policy experts think could curb spending, but there’s little certainty and a lot of politics likely to interfere while reform is being implemented and tweaked. Here’s what Karen and I wrote recently about cost controls called for in the law.
