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Democrats’ Health Care Bill Bends the Curve UPWARD!

CMS Actuaries Warn of ¾ Trillion Dollars in Increased National Health Expenditures
October 21, 2009 — Press Releases   

Additional Findings Will Especially Alarm Seniors and Patients Worried About Access to Health Care

 

Washington, DC – In another blow to Democrats’ push for a massive government takeover of the nation’s health care system, Ways and Means Ranking Member Dave Camp (R-MI) today released findings from a memo from the Obama Administration’s Chief Actuary for the Centers for Medicare and Medicaid Services (CMS), Richard Foster, that estimated the impact on national health expenditures under the House Democrats’ health care bill, H.R. 3200.  The memo stated that health expenditures would significantly increase if the Democrat bill became law.

This new data contradicts President Obama’s oft-stated demand that health care reform would “slow the growth of health care costs for our families, our businesses, and our government.”  The Obama Administration’s own health care experts confirm that H.R. 3200 will “bend the curve” in the wrong direction.

“This again proves that health care is too important and too complex to risk on one gigantic bill that is rushed through Congress,” said Camp.  “If we move forward with this bill, individuals, families and employers will all be subject to massive new taxes and it will put our nation’s financial future at risk.  The Democrats’ bill will not reduce the amount America spends on health care; it will only make the situation worse.  We need a common-sense, step-by-step approach that first focuses on reducing costs and then focuses on targeting assistance to those most in need.”

In the memo, CMS wrote that, “Total national health expenditures under [H.R. 3200] would increase by an estimated 2.7 percent in calendar year 2019.” Over the next 10 years, CMS predicts overall national health expenditures will jump by 2.1 percent, or $750.3 billion.

In light of comments by Office of Management and Budget Director Peter Orszag that, “The single most important thing we can do to improve the long-term fiscal health of our nation is slow the growth rate in health care costs,” Camp further remarked that “if the Budget Director is to be believed, then the worst thing we could do for our nation’s long-term fiscal health is to increase the growth rate in health care costs by enacting the Democrats’ health bill.”

While the dramatic increase in the nation’s health expenditures is a critical finding, there are dozens of others that call to question the merits of the House Democrats’ health care bill. Americans, especially the nation’s seniors, will find many of CMS’ findings disturbing.  They include:

Impact of Medicare Cuts 

  • “Providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and might end their participation in the program (possibly jeopardizing access to care for beneficiaries).” [Page 8]

  • “The Medicare Advantage rebate cuts would result in “less generous benefit packages.”  [Page 8]

  • “Enrollment in MA plans would decrease by about 64 percent.” [Page 8]

  • “It is important to note that the estimated savings shown in this memorandum for one category of Medicare proposals may be unrealistic.” [Page 8] 

  • “While such payment update reductions [productivity adjustments for Part A providers] would provide a strong incentive for institutional providers to maximize efficiency, it is doubtful that many could improve their own productivity to the degree achieved by the economy at large.  Over time, a sustained reduction in payment updates, based on productivity expectations that are difficult to attain, would cause Medicare payment rates to grow more slowly than, and in a way that was unrelated to, the provider’s costs of furnishing services to beneficiaries.  Thus, providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and might end their participation in the program (possibly jeopardizing access to care for beneficiaries).”  [Page 8]

  • “The additional demand for health services could be difficult to meet initially with existing health provider resources and could lead to price increases, cost-shifting, and/or changes in providers’ willingness to treat patients with low-reimbursement health coverage.” [Page 14]

  • “Federal premium subsidies would grow at a faster pace than health care costs.” [Page 5]

Tax Increases:

  • “$59 billion in new taxes will be levied on individuals who don’t have health insurance.” [Page 5]

Erosion of Employer Provided Coverage:

  • “Some smaller employers would be inclined to terminate their existing coverage, and companies with low average salaries might find it to their… advantage to end their plans, thereby allowing their workers to qualify for heavily subsidized coverage through the Exchange.  We estimate that such actions would collectively reduce the number of people with employer-sponsored health coverage by about 12 million.” [Page 7] 

  • “However, the existence of an Exchange and income-related premium subsidies may prompt some large employers of mostly low-wage workers to drop their coverage.  In such instances, the employer could reduce its costs by paying the penalty rather than the higher cost of offering health insurance; the employer would also gain a more stable and predictable, payroll-based liability for health care benefits.  We assume that the majority of employers fitting this description would ultimately drop their insurance offering…” [Page 5 of the Appendix]

Size of the Government-Run plan:

  • 40% of Americans enrolling the Democrats’ new Health Insurance Exchange would be in the government-run plan. [Page 7]

Limiting Access to Health Care:

  • “In practice, supply constraints might interfere with providing the services desired by the additional 34 million insured persons.” [Page 13] 

  • “Consideration should be given to the potential consequences of a significant increase in demand for health care meeting a relatively fixed supply of health care providers and services.” [Page 13} 

  • “The additional demand for health services could be difficult to meet initially with existing health provider resources and could lead to price increases, cost-shifting, and/or changes in providers’ willingness to treat patients with low-reimbursement health coverage.” [Page 14]

Medicaid Expansion:

  • “An estimated 18 million would gain primary Medicaid coverage as a result of the expansion of eligibility to all legal resident adults under 133 percent of the PFL.”  Roughly 2 million people who currently have employer-sponsored health insurance receive taxpayer-funded Medicaid supplemental coverage. 53% of the uninsured who would gain coverage under the Democrats’ bill would do so through a massive, $502 billion taxpayer-funded entitlement expansion not through any sort of ‘health reform.’ [Pages 2-4]

BACKGROUND: According to the CMS website, the CMS Office of the Actuary is responsible for: 

  • Conducting and directing the actuarial program for CMS and directs the development of and methodologies for macroeconomic analysis of health care financing issues.

  • Performing actuarial, economic and demographic studies to estimate CMS program expenditures under current law and under proposed modifications to current law.

  • Providing program estimates for use in the President’s budget and for reports required by Congress.

  • Studying questions concerned with financing present and future health programs, evaluates operations of the Federal Hospital Insurance Trust Fund and Supplementary Medical Insurance Trust Fund and performs microanalyses for the purpose of assessing the impact of various health care financing factors upon the costs of Federal programs.

  • Estimating the financial effects of proposals to create national health insurance systems or other national or incremental health insurance reform.

  • Developing and conducting studies to estimate and project national and area health expenditures.

  • Developing, maintaining, and updating provider market basket input price indexes and the Medicare Economic Index.

  • Analyzing data on physicians’ costs and charges to develop payment indices and monitors expansion of service and inflation of costs in the health care sector.

  • Performing actuarial reviews and audits of employee benefit expenses charged to Medicare by fiscal intermediaries and carriers.

  • Publishing cost projections and economic analyses, and provides actuarial, technical advice and consultation to CMS components, governmental components, Congress, and outside organizations.

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