Seniors listen to a round table discussion on the benefits of the Affordable Care Act.
By BRETT NORMAN | 7/28/11 8:36 AM EDT
The Affordable Care Act will drive health care spending up slightly, to nearly a fifth of the country’s gross domestic product by 2020, while extending insurance coverage to 30 million more Americans, a new report from CMS projects.
But health care’s hefty share of the country’s economic output is reached through an average annual growth in medical spending of 5.8 percent over the next decade — just 0.1 percent more than would have been spent without the health reform law, the report claims.
CMS published its findings this morning in Health Affairs. The report also projects that once all the data are in, health spending in 2010 will have grown a historically low 3.9 percent — slightly lower than the previous record low growth of 4 percent in 2009.
That’s an aftershock of the recession, which cost millions of people their jobs and, consequently, their health insurance, slowing medical spending.
At a Health Affairs forum Wednesday, CMS chief actuary Rick Foster, who has a record of questioning long-range spending projections based on overly optimistic assumptions, nonetheless said that “we like to think that the reality in 2014 will be much closer to the projections” than similar projections from the past.
If implemented as written, the health care law will “create a whole new world of health care spending,” Foster said.
Still, there are plenty of caveats. For one, the report assumes that physician payments next year will be cut by almost 30 percent in accordance with the Sustainable Growth Rate formula, even though Congress has blocked the cuts for the past 10 years.
In a conference call with reporters Wednesday, Foster said that the report also includes productivity improvements that would slow the growth of spending by 1.1 percent each year, a pace that, “in the long run, it may be difficult to sustain.” He added that revenue projections for an excise tax on exceptionally generous employer-offered health plans, slated to take effect in 2018, may be lower than expected.
The report does not count Obama administration estimates of savings that could be realized by the ACA’s experiments in overhauling medical payment and delivery systems, including medical homes, accountable care organizations and comparative effectiveness research.
The projections also omit any financing for the embattled CLASS long-term care program, which has again been targeted for repeal in the debt negotiations and, in any event, is required by law to be paid for by enrollee premiums.
The anticipated influx of people into public and private health insurance plans in 2014 will increase spending by 8.4 percent that year, but then it would level off to average of 5.8 percent over the decade, according to the projection.
Some health policy experts find that hard to believe.
“You can’t draw the conclusion that health reform is going to extend coverage to tens of millions of people and spending is going to remain essentially the same,” said Joseph Antos, a health policy expert at the American Enterprise Institute. “I wish it were true, but it just can’t be. This depends on everything working perfectly, including some politically very painful cuts to Medicare.”
The White House, however, emphasized the report’s findings of historically slow growth of health spending in the past two years, and the relatively modest expected increase in spending that will provide 30 million more Americans with health insurance.
“Overall Medicare cost growth dropped from 7.9 to 4.5 percent between 2009 and 2010,” Nancy-Ann DeParle, White House deputy chief of staff, said in a statement. “This slow-down occurred at the same time that many seniors with Medicare received cheaper prescription drugs.”
“The bottom line from the report is clear: More Americans will get coverage and save money and health expenditure growth will remain virtually the same,” she said.
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