Health Care Reform: Getting to the Details

Its been about ten days since the House passed its version of health care reform and just now,  it is possible to unwind and assess some of the cost/price details that are buried within the 2,000 page bill.  Similarly, it is also possible for the general public to begin the process of digesting the ramifications of what “may” happen to them (individually) if the meat of the legislation is enacted as written.  To clarify what’s beginning to take shape, take a look at two separate, recent information sources.

First, in a poll conducted by Stanford University, funded by Robert Wood Johnson for the Associated Press, the participants indicated a worried status on the costs of health care reform with 43% stating opposition to the legislation pending in Congress, 41% in favor and 15% undecided.  When asked more specific questions regarding cost trade-offs that could be faced, the 41% became less supportive. For example, there is broad support for requiring everyone to have health insurance (68%) but this same group of supporters when told about provisions that the Federal government would impose a fine, a penalty or a tax for people who chose not to buy insurance, support flipped to 63% in opposition.  Even among Democrats, 50% oppose the levy of taxes or fines on businesses or individuals in order to enforce the requirement of being insured.  The general consensus is a worry about rising taxes and an increased amount of federal debt to achieve health care reform.  Depending on the final amount of increases, the majority indicated that they were not in favor of reform if it caused taxes to rise substantially or the level of Federal debt to increase substantially.

The second piece of news comes from the Office of the Medicare Actuary (the Office of the Actuary) about the costs of the House bill.  Based on an analysis completed for the House Ways and Means Committee, requested by Republicans and released on November 14, the Office of the Actuary concluded that national health expenditures would rise by $289 billion between 2010 and 2019, consuming 21.1%  of GDP by 2019.  This compares to a projection of 20.8% of GDP in 2019 under current law.  While net Medicare spending is projected to reduce by $571 billion (not including the costs of the physician payment fix) during this period (primarily due to Medicare spending cuts), the Office of the Actuary warns that the projected effect of productivity adjustments as an offset to market basket increases is likely “unrealistic” as presented in the Bill.  They warn that such de facto price cutting or reimbursement reductions may lead providers to abandon the program altogether as they could find themselves fiscally unable to deliver the care required by Medicare beneficiaries.  The Office also states that the other provisions such as those related to comparative effectiveness research, administrative simplification, promoting health and wellness, and enhancing fraud and abuse prevention would have a minimal impact on reducing non-Medicare expenditures – $2.1 billion.  Compare this amount to a projected savings of $38 billion from instituting national tort reform provisions.  One final note: The Office of Actuary estimates that the number of uninsured (57 million) would reduce to 31 million under the House bill, principally as a result of the expansion of Medicaid and the increase in eligibility limits to 150% of the poverty limit.  This number is clearly higher than touted by Congressional members that support the House bill.

Unlike the Congressional Budget Office, the Office of the Actuary did not include a review of the income elements in the House legislation, focusing solely on the spending side of the legislation.  What is interesting to note however is that the income side associated with the “savings” activities contained within the Bill are viewed as “unrealistic” and minimal, suggesting perhaps that aside from direct cuts to Medicare expenditures, the economic results of reform are all on the tax versus spend side.

If there are any conclusions that one can draw from this news is that the Senate must be extremely wary of their task; namely, producing a companion bill to the House bill.  The House bill clearly does not achieve the desired reductions in overall healthcare spending as related to GDP and many of its provisions and its core, don’t even achieve the goal of eliminating the uninsured.  Frankly, the price of achieving less than a fifty percent reduction in the uninsured is astronomical and as concluded by the Office of the Actuary, at a greater cost to the U.S. economy than the present system (21.1 % of GDP vs. 20.8% of GDP under present law) with all of its inherent flaws.

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