Fwd: It’s Official -- Higher Health Care Costs

April 27, 2010 It's Official -- Higher Health Care Costs Recently, the actuaries at the Centers for Medicare and Medicaid Services (CMS), the agency that runs the giant entitlement programs, released its analysis of the new health care law. The AP reports that "White House officials have repeatedly complained that such analyses have been too pessimistic and lowball the law's potential to achieve savings," but the official CMS analysis reinforces several of Heritage's predictions regarding Obamacare. Some highlights of the CMS report: -- Mandates Without Impact. Writes CMS, "For many individuals, the penalty amounts for not having insurance coverage were not sufficiently large to have a sizable impact on the coverage decision" (p. 7). Concerning employers, "the penalties would not be a substantial deterrent to dropping or forgoing coverage" (p. 7). So these provisions will do little to achieve their purpose (i.e., to encourage individuals to carry coverage and employers to offer it). -- If You Like it, You May Still Lose It: CMS reports that about 14 million Americans will end up losing their current employer-sponsored coverage. Though many will instead receive coverage in the exchange, this shows that instead of encouraging employers to offer coverage, new law creates incentives to dump the responsibility of their employees' health care onto taxpayers. -- Increase Medicare Solvency? Don't [Double] Count on It. Estimated savings for Medicare Part A would be substantial enough to extend the program's solvency to 2029 — under prior law, funds would be exhausted by 2017. However, CMS writes, "In practice, the improved HI financing cannot be simultaneously used to finance other Federal outlays (such as the coverage expansions) and to extend the trust fund…" (p. 9). Savings from Medicare will fund newly created programs — not reduce the program's future unfunded liabilities. -- Medicare Savings (If They Occur) Mean Bad News for Seniors. Medicare hospital payments will grow at a slower rate than the cost of providing services, such that "… providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and, absent legislative intervention [think "doc fix"], might end their participation in the program (possibly jeopardizing access to care for beneficiaries)" (p. 10). As far as changes for Medicare Advantage enrollees, CMS reports that "new provisions will generally reduce MA rebates to plans and thereby result in less generous benefit packages … in 2017 … enrollment in MA plans will be lower by about 50 percent …" (p. 11). -- New Federal Programs Born to Be Bailed Out. The CLASS Program will offer long-term care insurance, but enrollees will pay premiums (which are, by the way, counted as an offset to the overall cost of the bill) for five years before benefits are attainable. This program is doomed from the get-go: CMS reports that "… voluntary, unsubsidized, and non-underwritten insurance programs such as CLASS face a significant risk of failure as a result of adverse selection by participants … there is a very serious risk that the problem of adverse selection will make the CLASS program unsustainable" (p. 15). -- Bending the Spending Curve UP? CMS reports that under new law, overall national health expenditures will increase by $311 billion. This is the net result of increases in coverage and decreased spending from reductions to Medicare and due to the excise tax on Cadillac insurance plans. Expect this figure to rise if Congress indefinitely postpones unsustainable Medicare cuts (again, think "doc fix") and yields to political pressure to ax the Cadillac tax, both of which will likely happen. Comparative Effectiveness may have a small effect on reducing the growth of health care costs, but, writes CMS, "We show a negligible financial impact over the next 10 years for the other provisions intended to help control future health care cost growth" (p. 13). Bottom Line: A health care law that will be costly to taxpayers, burden businesses, and create more problems than it solves. Follow the side effects of Obamacare here. RECENT ENTRIES Congress Regulates Themselves Out of Coverage The Catch 22 of Obamacare Risk Pools IRS Could Eat Your Refund Pew Poll: Government Is Not the Solution  Share Today's Side Effects Facebook Myspace Digg Linkdin Twitter   Facebook Twitter YouTube Kindle Flickr Support our work by becoming a member with your gift of $25 or more. The Heritage Foundation 214 Massachusetts Avenue, NE Washington, DC 20002-4999 Call us at (202) 546-4400 Add morningbell@heritage.org to your address book to ensure that you receive emails from us.