Senate bill would increase health-care spending less steeply than thought, expert says
By Shailagh Murray
A top Medicare official found that the final version of the Senate health-care bill may have the effect of expanding coverage to more uninsured people while not increasing overall health-care spending quite as steeply as previously anticipated.
Democrats had nervously anticipated the report, written by Richard S. Foster, the chief actuary for the Center on Medicare and Medicaid Services, or CMS, which administers the two health-care programs. Foster released several studies late last year raising questions about the fiscal impact of the House and Senate bills.
But his most recent findings offer a somewhat brighter picture, at least of the Senate bill, potentially increasing its stature as House and Senate negotiators craft compromise legislation in the weeks ahead.
Foster found that an additional 34 million U.S. citizens and legal residents would receive health coverage under the revised Senate bill by 2019, compared to the 31 million estimated by the Congressional Budget Office, the nonpartisan agency that conducted the official cost estimate of the Senate bill. The new CMS figure also was higher than the 33 million Americans Foster estimated would eligible for coverage under an earlier Senate version.
But the CMS report estimated that the final Senate bill would cost $882 billion from 2010 to 2019, slightly more than CBO's cost estimate of $871 billion for the same 10-year period.
According to Foster's model, about 67 percent of individuals who are eligible to purchase coverage over new insurance exchanges, because they do not have access to affordable plans from their employers, would chose to participate in this new marketplace. Among those who elect to remain uninsured, CMS found, many will conclude that the penalties the legislation would impose for not carrying insurance "were not sufficiently large to have a sizable impact on the coverage decision." Those fees would climb to $750 per year for individuals by 2016.
Foster was sharply critical of a new long-term care insurance program in the bill, known as the Community Living Assistance Services and Supports, or CLASS, program. He estimated it would produce a net savings of $38 billion over the first 10 years, but that over the longer term, expenditures would exceed premium receipts. "There is a very serious risk that the program would become unsustainable," Foster wrote.
The CMS report also revised its estimate of the total increase in health spending if the Senate bill becomes law, to .6 percent over 10 years, compared to .7 percent over 10 years, as Foster found in an earlier report. But he found that "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," such as Medicaid, which Congress is expected to vastly expand.
As previously expressed by both CMS and CBO, Foster was skeptical of provisions aimed at lowering health-care costs, including numerous changes to Medicare, and the imposition of an excise tax on high-cost health plans, aimed at curtailing the overuse of tax-free employer health benefits. "The proposed reductions...would have a downward impact on future health care cost growth rates," Foster found. But in the short term, he added, "these effects would be outweighed by the increased costs associated with the expansions of health insurance coverage."
January 9, 2010; 2:23 AM ET
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