Health Care Cost
Increase Is Projected for New Law
Published: April 23, 2010 - New York Times
WASHINGTON — A government analysis of the new health care law says it will
not slow the overall growth of health spending because the expansion of
insurance and services to 34 million people will offset cost reductions in Medicare
and other programs.
The study,
by the chief Medicare actuary, Richard S. Foster, provides a detailed, rigorous
analysis of the law.
In signing the measure last month, President
Obama said it would “bring down health care costs for families and
businesses and governments.”
But Mr. Foster said, “Overall national health expenditures under the health
reform act would increase by a total of $311 billion,” or nine-tenths of 1
percent, compared with the amounts that would otherwise be spent from 2010 to
2019.
In his report, sent to Congress Thursday night, Mr. Foster said that some
provisions of the law, including cutbacks in Medicare payments to health care
providers and a tax on high-cost employer-sponsored coverage, would slow the
growth of health costs. But he said the savings “would be more than offset
through 2019 by the higher health expenditures resulting from the coverage
expansions.”
The report says that 34 million uninsured people will gain coverage under the
law, but that 23 million people, including 5 million illegal immigrants, will
still be uninsured in 2019.
Republicans said the report vindicated their concerns about the law, which
was approved without a single Republican vote. The White House pointed to bright
spots in the report and insisted that the law would help bring down costs. In
2004, when Mr. Foster raised questions about cost estimates by the Bush
administration, Democrats lionized him as a paragon of integrity.
Mr. Foster says the law will save Medicare more than $500 billion in the
coming decade and will postpone exhaustion of the Medicare trust fund by 12
years, so it would run out of money in 2029, rather than 2017. In addition, he
said, the reduction in the growth of Medicare will lead to lower premiums and
co-payments for Medicare beneficiaries.
But, Mr. Foster said, these savings assume that the law will be carried out
as written, and that may be an unrealistic assumption. The cuts, he said, “could
become unsustainable” because they may drive some hospitals
and nursing
homes into the red, “possibly jeopardizing access to care for
beneficiaries.”
Nancy-Ann
DeParle, director of the White House Office of Health Reform, said that fear
was unfounded.
Mr. Foster’s report, which analyzes the effect of the law on national health
spending of all types, has a different focus from studies by the Congressional
Budget Office, which concentrated on federal spending and revenues and
concluded that the law would reduce budget deficits by a total of $143 billion
over 10 years.
In his report, Mr. Foster made these points:
¶The government will spend $828 billion to expand insurance coverage over the
next 10 years. Expansion of Medicaid
accounts for about half of the cost. The number of Medicaid recipients will
increase by 20 million, to a total of 84 million in 2019.
¶People who go without insurance and employers who do not provide coverage
meeting federal standards will pay $120 billion in penalties from 2014 to 2019.
Individuals will pay $33 billion of that amount, while employers pay $87
billion.
¶The law will reduce consumers’ out-of-pocket spending on health care by $237
billion over 10 years, to a total of $3.3 trillion.
Cuts in federal payments to private Medicare Advantage plans will “result in
less generous benefit packages,” the report said. By 2017, it said, “enrollment
in Medicare Advantage plans will be lower by about 50 percent, from its
projected level of 14.8 million under the prior law to 7.4 million under the new
law.”