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Consumers to Pay More Under Reform

The latest analysis of health care reform – out this week from bean counters at Medicare – shows reform will raise health care spending slightly over the next 10 years, not reduce it as promised by President Obama. That won’t make selling it on the stump any easier. Yet there’s a glimmer of hope in the out years of the 10-year projection that the plan will begin to “bend the cost curve.”

Here’s the real bad news for reform supporters. The private insurance market will absorb most of the increase, and most of that will fall on individuals. Employer contributions for their workers’ private insurance will actually fall $120 billion in 2019 from previous projections because of reform.

Individuals will get hit two ways. First, the actuaries at CMS are projecting a huge 9 percent increase in out-of-pocket expenses in 2018 and 2019, after the so-called “Cadillac tax” goes into effect. This is a steep excise tax on high-cost insurance plans. To avoid tax penalties, experts expect employers with such plans – which may only be high-cost because they are filled with sicker and older beneficiaries – will reduce coverage by increasing co-pays and deductibles.

A second factor driving out-of-pocket expenses higher for individuals under reform will be the insurance mandate, which will drive many people to seek coverage through the new state exchanges. CMS predicts over 30 million people will be getting insurance through the exchanges in 2019, substantially more than the 24 million projected by the Congressional Budget Office last March, when reform passed.

While low- and moderate-income individuals and families can get subsidized plans through the exchanges, most of those subsidies will only be partial. And many of previously uninsured who will be required to buy insurance won’t be eligible for a subsidy at all.

If you dig deep into the CMS numbers, though, there is a silver lining for reform supporters.

Health care’s share of the domestic economy in 2019 will be higher than it would have been had reform not passed, according to economists at the Centers for Medicare and Medicaid Services. Health care will claim 19.5 percent of gross domestic product that year, not the 19.3 percent the same group predicted last February, before reform passed.

Overall spending on health care is expected to grow by 6.3 percent on average over the decade, which is still about twice as fast as the rest of the economy.

If you dig deep into the CMS numbers, though, there is a silver lining for reform supporters. The rate of spending is expected to slow considerably near the tail end of the decade, as the initial costs of adding 32.5 million people to the ranks of the insured begin to moderate and the projected savings in Medicare take full effect. That bodes well for the second decade of reform – assuming the Democrats can keep its provisions in place.

A continued ratcheting down of payments to hospitals and physicians would jeopardize seniors’ access to services.

These latest projections also offer solace to those primarily concerned about federal taxes and Medicare solvency. Medicare spending will decline $86.4 billion from previous projections due to reforms, the report said. “The lower payments from improvements in productivity and lower Medicare Advantage payments will more than offset the phase-out of the donut hole (in the Medicare prescription drug benefit),” said Andrea Sisko, who presented the data for CMS.

The August Medicare trustees report expressed a lot of skepticism about the agency’s ability to achieve productivity savings. It warned that a continued ratcheting down of payments to hospitals and physicians would jeopardize seniors’ access to services. But Richard Foster, chief actuary for CMS, said at a press briefing yesterday that this was primarily a long-term concern. “Within the next 10 years, most experts think the productivity updates are feasible,” he said. “The real question is what happens in the longer range.”

So, if Medicare spending is going to be less than expected over the next decade because of reform, whose payments are going up? Interestingly, it’s not projected to be state and local governments, which combined will see only a $10.6 billion increase over the earlier projections because of reform, according to the CMS economists. While more than half of the uninsured will be getting coverage through Medicaid programs, the federal government is picking up 90 percent of the new Medicaid tab, with its share being offset by the savings in Medicare.

Merrill Goozner is a regular contributor to THCB. You can follow his work here and on the insightful GoozNews. This story first appeared in The Fiscal Times, a site that has been catching our eye increasingly of late.

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Leonard RobbinsExhaustedMDDevon Herrick, National Center for Policy AnalysismaggiemaharMary MD Recent comment authors
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ExhaustedMD
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ExhaustedMD

Dr Vickstrom: Not sure if you will read this if your last post is your last attendance to this site, much less this thread itself, but you are right, and it is why at least for me, as a moderate and independent thinker politically and culturally, I tired of this polarity bashing we have to put up with. These idiots are focused on party principles first and often only, and if benefits the population at large, “oh, that’s nice.” I read an article today in Psychology Today that tries to draw a relationship to the pursuit of fast food to… Read more »

Peter
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Peter

“Then what will the liberal politicians do for their money fix?”
Same as Republicans, corporate America, you know, the ones saying government’s not the answer – we are.

Nate
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Nate

“The fact that you romanticize farm chores only exposes you for what you are.” And that is? Do we need to wait for the continuation post next week? I sure hope that wasn’t really the finale, I don’t think I could go on not knowing how it ends. Is it just me or is it ironic that you follow that up with; “I thought I was going to get serious discussion of issues from people who knew what they were talking about, but did not. It’s just one partisan troll after the next, ad hominem attacks, followed by people who… Read more »

Nate
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Nate

“the entire system collapses of it’s own greed.”
Then what will the liberal politicians do for their money fix? If they can’t borrow billions from worthless insurance promises how are they going to fund all their socialist dreams?

Craig "Quack" Vickstrom, M.D.
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Craig "Quack" Vickstrom, M.D.

@Nate, How pathetic. Yes, choring at my grandparents’ farm was not the highlight of my life. Yes, the smell does attenuate when you live with it. I didn’t, as I only visited. The fact that you romanticize farm chores only exposes you for what you are. This is probably my last post at THCB. I thought I was going to get serious discussion of issues from people who knew what they were talking about, but did not. It’s just one partisan troll after the next, ad hominem attacks, followed by people who think they understand health care. It’s also full… Read more »

Leonard Robbins
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As a life and health insurance agent in California, I doubt we will see to much more of these double digit rate increases. Health insurance will become a luxury for the rich, which in turn will price it even higher until the entire system collapses of it’s own greed.

Peter
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Peter

Nate, getting great deals on standard assembly line procedures may be one thing, yet I don’t want to put my healthcare in the hands of a car salesman that looks to lure you into the showroom with price hooks. If you think docs are hard to rate by price try dentists, I’ve had about a 90% failure rate on dentist hunting, and price is he last I consider. You may want to send your clients employees to the lowest price huckster but I wonder how the employees feel about it. and if things don’t turn out the way you expected… Read more »

Nate
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Nate

“Nor will it ever be “designed” that way. Would you like to see docs advertising; “$99 down, $399 per month, no interest,”
You live a blissful like Peter, if they can do it for lasik, breast augmentation, dental work, and many other procedures why do you find it so far fetched?

ExhaustedMD
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ExhaustedMD

read it and weep, obamacare butt lickers!
http://www.realclearpolitics.com/printpage/?url=http://www.realclearpolitics.com/articles/2010/09/13/gangster_government_stifles_criticism_of_obamacare_107122.html
This is what politics is about and what will do if this garbage continues!!!!

Peter
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Peter

“..something that our current system isn’t designed to do.”
Nor will it ever be “designed” that way. Would you like to see docs advertising; “$99 down, $399 per month, no interest, for the best by-pass surgery money can buy”? Docs don’t want to discuss price, let alone quality (if it can be defined). This isn’t retail, nor should it be.

Devon Herrick, National Center for Policy Analysis
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Devon Herrick, National Center for Policy Analysis

I don’t believe you can achieve productivity savings by dictating to providers – from the top down – how to practice medicine in more efficient ways. It’s akin to consultants telling a faltering Kmart to merely act like Walmart. Kmart undoubtedly would operate like Walmart if it was capable of doing so. To achieve productivity gains firms have to compete on price and quality – something that our current system isn’t designed to do.

Nate
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Nate

” See Media Matters here on Peterson’s “lies” about Social Security.” WOW that is rich, go to a far left Soros funded propoganda site to prove the conservative is lieing. Why don’t we just ask the DNC Maggie and save the charade? “CBO has some hard numbers which suggest that reform will pay for itself.” Please who do you think falls for this any more? Yes CBO, based on the assumptions they are forced to use by the people who wrote the bill claiming it will save money, found the bill will save money. All that analysis proves is the… Read more »

Nate
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Nate

” The comments here at THCB smell of the chicken coop.”
Are you saying there is a problem with the way Chicken coops smell? Sounds like something a snobby big city doc would say. Suppose you got issues with the pig pen and cow manure as well?

Nate
Guest
Nate

“What exactly is the meaning of “sustainable” in this context?” Sustainable meaning the product will never reach a price higher then the majority of customers are willing to pay. For example there are numerous changes underway in the way small businesses buy insurance, and none of them are just passing on the cost. Small employers are joining PEOs, self funding, and taking other steps. These are all actions the majority of small businesses refused to take 2+ years ago becuase they were willing to buy insurance at the cost without them. Now that the cost has increased and income dropped… Read more »

maggiemahar
Guest

First, Merrill is an excellent reporter and I have great respect for his work. But its important to recognize two things. –1) Any projections about what reform will cost and how much it will save are, to a large degree, wild guesstimates. No one knows how employers, employees, the uinsured, hospitals, and other care providers will behave. Will providers respond to incentives to reduce errors and waste? Will they respond to penalties if they don’t reduce errors and waste? How many people will sign up for insurance? How many will pay penalties? Where will unemployment be in 2014? Are we… Read more »