Published April 23, 2010
WASHINGTON -- The Obama administration on Friday defended the new health insurance law after a report from its own Medicare services agency showed the provisions will increase the nation's health care tab over the next 10 years instead of bringing costs down.
The sobering assessment by the Centers for Medicare and Medicaid Services concludes what Republicans had warned about during heated debate -- that the double-counting of Medicare spending -- as both savings and as a means to shore up the debt-ridden government fund for seniors' health care -- means the cost is unrealistic.
The analysis also found that the law falls short of the president's twin goal of controlling runaway costs, raising projected spending by about 1 percent over 10 years, or $311 billion, up from the $222 billion previous estimated.
Health and Human Services Secretary Kathleen Sebelius ignored the bad news Friday, emphasizing that Chief Actuary Richard S. Foster agrees that 34 million people will be insured who aren't currently.
"The Affordable Care Act will cover more Americans and strengthen Medicare by cracking down on waste fraud and abuse, modernizing payment systems and improving benefits by providing free preventive services, supporting innovations that help control chronic disease and closing the prescription drug donut hole," Sebelius said.
"The actuaries also find that under the new law, the life of the Medicare trust fund is extended by 12 years while reducing annual Medicare premiums by nearly $200 per senior in the coming years," she said.
But House Minority Leader John Boehner, R-Ohio, said Friday the report shows that not only will the national health care costs increase, it will force more than 7 million seniors off their current Medicare coverage.
"According to his own administration's analysis, the health care law the president signed one month ago today would violate his pledge to 'bend the cost curve' and force millions of seniors off their current Medicare coverage. This is in addition to what we already know about how this new law is squeezing employers with job-killing tax hikes and leaving middle-class families to brace for higher premiums," he said.
Among the findings, the actuary concluded that:
-- About 14 million people would lose their employer coverage by 2019 as smaller employers terminate coverage and workers who currently have employer coverage become enrolled in Medicaid;
-- The estimated reductions in the growth rate of health spending "may not be fully achievable" because "Medicare productivity adjustments could become unsustainable even within the next 10 years, and over time the reductions in the scope of employer-sponsored health insurance could also become an issue";
-- New fees and taxes on medical device makers will "generally be passed through to health consumers in the form of higher drug and devices prices and higher premiums";
-- By 2011 and 2012 the initial $5 billion in federal funding for the creation of a national high-risk pool "would be exhausted, resulting in substantial premium increases to sustain the program; we anticipate that such increases would limit further participation";
-- It is reasonable to expect that a significant portion of the increased demand for Medicaid would be difficult to meet, particularly over the first few years";
-- Businesses would pay $87 billion in penalties between 2014-2019 for failure to offer insurance.
The warnings could become a major political liability for Democratic lawmakers in the midterm elections though the report carried a disclaimer saying it does not represent the official position of the Obama administration. White House officials have repeatedly complained that such analyses have been too pessimistic and lowball the law's potential to achieve savings.
"I don't doubt that those who opposed health care reform are going to continue to make the same, tired old arguments that have been made for years and years as it relates to health care.The president will and the administration will continue to talk about the benefits of what was passed in the law as many of those benefits come on line in the next several months," he said.
A separate CBO analysis released Thursday estimated that 4 million households would be hit with tax penalties under the law for failing to get insurance.
Though the report said the new Medicare costs could drive out of business 15 percent of medical care providers who take Medicare Part A, White House Office of Health Reform Director Nancy-Ann DeParle issued a post on the White House blog that argues that the actuary's speculation "ignores key provisions that will strengthen our health care work force."
"When the actuary raised similar concerns months ago, hospital leaders reaffirmed their commitment to serving America's seniors. Moreover, organizations like the American Hospital Association and American Medical Association supported reform and would have been unlikely to back the law if they believed it would hurt their own viability," she wrote.
The report acknowledged that some of the cost-control measures in the bill -- Medicare cuts, a tax on high-cost insurance and a commission to seek ongoing Medicare savings -- could help reduce the rate of cost increases beyond 2020. But it held out little hope for progress in the first decade.
"During 2010-2019, however, these effects would be outweighed by the increased costs associated with the expansions of health insurance coverage," Foster wrote. "Also, the longer-term viability of the Medicare ... reductions is doubtful." Foster's office is responsible for long-range costs estimates.
Republicans said the findings validate their concerns about Obama's 10-year, nearly $1 trillion plan to remake the nation's health care system.
"A trillion dollars gets spent, and it's no surprise -- health care costs are going to go up," said Rep. Dave Camp, R-Mich., a leading Republican on health care issues. Camp added that he's concerned the Medicare cuts will undermine care for seniors.
Passed by a divided Congress after a year of bitter partisan debate, the law would create new health insurance markets for individuals and small businesses. Starting in 2014, most Americans would be required to carry health insurance except in cases of financial hardship. Tax credits would help many middle-class households pay their premiums, while Medicaid would pick up more low-income people. Insurers would be required to accept all applicants, regardless of their health.
Administration officials argue the increase is a bargain price for guaranteeing coverage to 95 percent of Americans. They also point out that the law will decrease the federal deficit by $143 billion over the 10-year period, even if overall health care spending rises.
The report's most sober assessments concerned Medicare.
In addition to flagging the cuts to hospitals, nursing homes and other providers as potentially unsustainable, it projected that reductions in payments to private Medicare Advantage plans would trigger an exodus from the popular program. Enrollment would plummet by about 50 percent, as the plans reduce extra benefits that they currently offer. Seniors leaving the private plans would still have health insurance under traditional Medicare, but many might face higher out-of-pocket costs.
In another flashing yellow light, the report warned that a new voluntary long-term care insurance program created under the law faces "a very serious risk" of insolvency.
Fox Business Network Rich Edson and The Associated Press contributed to this report.