CMS: House bill increases health care costs

November 14, 2009
Live Pulse: Politico

Democrats have promised that health reform would reduce health care costs, but legislation the House passed last week would increase costs over the next decade by $289 billion. By 2019, health costs would rise to 21.1 percent of GDP compared to 20.8 under current law, according to an actuarial report prepared by the Centers for Medicare and Medicaid Services.

“With the exception of the proposed reductions in Medicare payment updates for institutional providers, the provisions of H.R. 3962 would not have a significant impact on future health care cost growth rates. In addition, the longer-term viability of the Medicare update reductions is doubtful,” the report said.

In other words, outside of Medicare payment cuts to hospitals, the bill doesn’t curb increasing health care costs. And even the Medicare payment cuts will be difficult to sustain.

The analysis is more bad news for Democrats, who are facing increasing criticism that their reforms don’t do enough to control costs. Republicans released the analysis and jumped on the news.

“This report confirms what virtually every independent expert has been saying: Speaker Pelosi’s health care bill will increase costs, not decrease them,” said Rep. Dave Camp, the ranking Republican on the House Ways and Means Committee. “This is a stark warning to every Republican, Democrat and Independent worried about the financial future of this nation. I hope my colleagues in the Senate heed CMS’ findings and refuse to rush ahead until any bill under consideration can be certified to actually reduce health care costs.”

I’m reading over the report and will update the post shortly.

Update: The 31-page report also analyzes the impact of a number of the House bill’s other policy proposals. After the jump, I’ve listed the most interesting ones, page by page.

Update2: House Speaker Nancy Pelosi’s spokesman, Nadeam Elshami, offers this spin: “The report shows that our health reform bill will extend the life of the Medicare trust fund by five years – significantly longer than any proposal in recent years. Medicare actuaries estimate $100 billion more in savings than CBO from Medicaid and Medicare. In 2019, CMS estimates that our bill will cover 10 percent more of the population with less than a 1.3 percent increase in national health expenditures – that illustrates a bending of the cost curve.”

Pg. 3 – “Most of the provisions of H.R. 3962 that were designed, in part, to reduce the rate of growth in health care costs would have a relatively small savings impact.” Translation: Things like wellness and prevention programs and reducing Medicare fraud don’t save much money.

Pg. 4 – Acknowledges that with so many unprecedented provisions, the report’s estimates are more uncertain than usual.

Pg. 6 – A public plan would cost 4 percent more than private plans because its utilization rules would not be as strict as the private sector.

Pg. 7 – About 3 million more people would get coverage through their employers. The report figures that about 15 million more people would gain employer coverage but 12 million would lose it because it would be cheaper for their employers to let them buy coverage through the public insurance exchange.

Pg. 7 – 18 million people will remain uninsured and choose to pay the fines for not carrying insurance rather than buy coverage.

Pg. 8 – The bill reduces Medicare payments to hospitals and nursing homes over time based on productivity targets. The idea is that by paying institutions less money, they will be forced to become more productive. But it’s doubtful that many institutions can hit those targets, which could force them to withdraw from Medicare, the report says.

Pg. 9 – By 2014, Medicare Advantage enrollment would drop 64 percent from 13.2 million to 4.7 million because of less generous benefit packages.

Pg. 9 – Over the next decade, the report estimates “a relatively small reduction in non-Medicare federal health care expenditures of $2.1 billion, all of which is associated with the comparative effectiveness research provision.”

Pg. 10 – While many argue that wellness programs decrease costs by preventing expensive-to-treat diseases, they don’t save money. More screenings and preventive care combined with a longer lifespan generally increase costs, the report says.

Pg 16 – “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, changes in providers’ willingness to treat patients with low-reimbursement health coverage.” Translation: A crush of newly insured patients could be a shock to the system.