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Bending the Curve – The Wrong Way

October 23, 2009

Obama Administration officials have repeatedly emphasized the need to “bend the curve” of health-care costs. Reducing increases in health spending, they argued, was essential to controlling future federal budget deficits and making insurance affordable for most Americans. Now, in the first comprehensive evaluation of one of the major congressional health reform bills, analysts find that it does bend the cost curve–in the wrong direction. The study of HR 3200, as reported by the House Ways and Means Committee, concludes that the legislation would raise total national health spending by $750 billion over the decade from 2010 to 2019.


The study was done by Richard Foster, chief actuary of the Centers for Medicare and Medicaid Services, an arm of the Department of Health and Human Services. CMS’s Office of the Actuary, like the Congressional Budget Office, is often asked to present independent, non-partisan estimates of major health care proposals. In its study, CMS finds that the Ways and Means Committee bill, one of three major bills in the House, would dramatically reduce the number of uninsured Americans, from an estimated 57 million in 2019 to 23 million. But this expansion of insurance coverage “would typically result in a fairly substantial increase in the utilization of health care services, with a corresponding impact on total health expenditures.”


The $750 billion spending shift over the decade would represent a 2.1 percent gain, but the size of the increases rises in out years. In 2019, for example, total national health spending was projected to be 2.7 percent higher–$4.796 trillion, or 21.3 percent of Gross Domestic Product. Without the legislation, CMS estimated, total national health spending would be $4.671 trillion, or 20.8 percent of GDP.


The study doubted that many of the bill’s provisions designed to reduce overall health spending would have much effect. These include greater use of prevention and “wellness” programs and more emphasis on “comparative effectiveness research”-limiting treatments to those with the best proven records. The CMS study estimated the comparative effectiveness research might cut national health spending by $8 billion over the 2010-2019 period. However, it doubted the prevention and wellness programs would reduce spending at all. Although these programs might diagnose diseases in early stages and promote healthier lifestyles, they also mean “additional costs [being] incurred as a result of increased screenings, preventive care, and extended years of life.”

The CMS study was requested by Rep. Dave Camp of Michigan, the ranking Republican member of the House Ways and Means Committee. The study cautioned that its forecasts were subject to much uncertainty, because the “the scope and magnitude of the [proposed] changes are such that few precedents exist for use in estimation.” An earlier study by the Lewin Group, a health care consulting firm, also concluded that one of the major congressional proposals would increase national health spending. Lewin evaluated legislation passed by the House Energy and Commerce Committee and estimated that the bill would add $525 billion to national health spending in the 2010-2019 decade.