Gov’t forecast: Moderate spending increase as 32 million gain coverage under health overhaul

By Ricardo Alonso-zaldivar, AP
Thursday, September 9, 2010

Gov’t: Spending to rise under health care overhaul

WASHINGTON — The nation’s health care tab will go up — not down — as a result of President Barack Obama’s sweeping overhaul. That’s the conclusion of a government forecast Thursday, which also predicts the increase will be modest.

The average annual growth in health care spending will be just two-tenths of 1 percentage point higher through 2019 with Obama’s remake, said the analysis from Medicare’s Office of the Actuary. And that’s with more than 32 million uninsured gaining coverage because of the new law.

“The impact is moderate,” said Andrea Sisko, an economist with the nonpartisan unit that prepared the report.

Factoring in the law, Americans will spend an average of $13,652 per person a year on health care in 2019, according to the actuary’s office. Without the law, the corresponding number would be $13,387.

That works out to $265 more with the overhaul.

The big picture numbers are $4.6 trillion with the overhaul in 2019, and $4.5 trillion without it. The nation will spend $2.6 trillion on health care this year.

The new bottom line is guaranteed to provide ammunition for both sides of a health care debate that refuses to move offstage. Republicans are vowing repeal if they win control of Congress this fall, although they are unlikely to have enough votes to override an Obama veto.

For critics, the numbers show that the law didn’t solve the cost problem, although Obama repeatedly said he wanted to bend the spending curve down.

The analysis found that health care spending will grow to nearly 20 percent of the economy in 2019. That siphons off resources that could be invested in education, research, transportation or other areas. Medical costs now account for about 17 percent of the economy, and some experts think that’s already too much.

“We really haven’t trimmed health care spending,” said Robert Bixby, executive director of the Concord Coalition, which advocates for reducing the federal deficit. “Even if we found a way to provide more people with coverage, we still have the same fiscal problem we always did. Frankly, it’s a little bit more difficult to solve now because we have made a major new commitment.”

Bixby’s group raised concerns about the cost of the health care legislation, but did not oppose it.

For advocates of the law, the numbers show that expanding coverage to 93 percent of eligible Americans comes at a relative bargain price. Moreover, if Congress sticks to cost controls in the legislation, there’s potential beyond 2020 to rein in the growth of health care spending. The new projections show a slowdown starting around 2018.

“By the end of the projection period, we estimate (costs) will grow more slowly,” said John Poisal, who worked on the forecast.

It’s a long way off, but under the health care law, the big coverage push doesn’t start until 2014.

That’s when the government will offer tax credits to help middle-class people buy private coverage through new insurance markets in their states. At the same time, Medicaid will be opened up to millions more low-income people. Insurers will have to accept all applicants, regardless of health problems. And most Americans will be required to carry coverage or face a fine from the IRS.

The study also showed:

—Government is becoming the dominant player in health care even without Obama’s law. Federal, state and local government spending will overtake private sources in 2011, three years before the main provisions of the overhaul take effect. The biggest programs are Medicare and Medicaid.

—Even after the health care overhaul is fully phased in, three out of five people under age 65 will still have private coverage, with most continuing to get benefits through their employers.

—Two federal-state programs, Medicaid and children’s health insurance, will grow dramatically under the overhaul. Enrollment will jump 34 percent between 2013 and 2014, to more than 85 million people. States will be bigger players in health care — and face new pressures over the long run.

The White House released its own analysis of the report, calculating that total health care spending per insured person would be more than $1,000 lower under the law.

A White House blog post from health reform director Nancy-Ann DeParle said that by 2019 overall health care spending per insured person would average $14,720 under the law, compared with $16,120 if Congress and the president had not acted, or $1,400 less.

That statistic was not part of the Medicare analysts’ projections, and there was no official response from the actuary’s office to the White House estimate.

DeParle acknowledged that spending would rise in the short run as uninsured people gain coverage, but noted the rate of growth would slow in the second half of the decade. “A close look at this report’s data suggest that for average Americans, the Affordable Care Act will live up to its promise,” she said.

The Medicare analysts’ report is available online from the journal Health Affairs.


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