The Centers for Medicaid and Medicare Services has released a report regarding how the bill pending in the House of Representatives – H.R. 3200 – will affect the total cost of health care over the next ten years. The report contains bad news for Democrats – but it isn't good news for Republicans or for any American.
I have posted the CMS report to a new website I am creating that will contain information on health care financing reform. As of now, the CMS report is the only study there, but I will be adding more in the days to come and creating links to other sites.
I have not yet had the opportunity to study the CMS report in detail, but the bottom line is grim. Without reform, annual health care expenditures in the United States are expected to rise from $2.6 trillion in 2010 to $4.7 trillion in 2019. If the House bill is enacted, total expenditures will not only not decrease over the next decade – they will increase even slightly more to $4.8 trillion.
What do we get in return for this marginal increase in spending? An additional 34 million people – over 10% of the population – would be covered by health insurance, and on average we would have substantially better health insurance than what we have now. Everyone could obtain coverage regardless of preexisting conditions. Everyone would be entitled to preventive care free of cost. Out-of-pocket expenses for medical care would be greatly limited. There could be no lifetime limits on medical coverage. In short, the House bill would ensure that nearly everyone would receive high quality medical care. More people would be covered and people would be entitled to more health care. And the bill contains a number of provisions designed to reduce the cost of medical care. But all of the savings in the bill would be more than outweighed by the cost of serving additional people and providing additional medical services.
In light of what we would gain, is it worth it to enact H.R. 3200? Of course. With a 2% increase in spending we would serve an additional 10% of the population and would improve coverage for nearly everyone else as well.
However, bill doesn't save any money, and that alone is a serious problem. Medical care costs are still expected to climb to over 20% of GDP by 2019. By comparison, a couple of decades ago health care consumed only 5 or 6 percent of our household budgets and our gross domestic product. Our society can't support a health care system that consumes a fifth of our national income. Our economy simply won't be competitive with those of other countries.
Is there any hope for trimming costs? Probably the most fruitful area is the "public option." The "public option" in H.R. 3200 is the "Medicare plus 5%" plan" that would pay physicians the same they would receive under Medicare plus 5%. The CMS Report states that it expects the cost of medical care under the public option would be 18% lower than the average cost of medical care under private insurance plans, due mainly to lower reimbursement rates for physicians and hospitals and, to a lesser extent, due to lower administrative costs under the public plan. However, the CMS predicts that premiums will be only 11% lower under the public plan, and that only 27 million Americans will purchase insurance under the public plan. If either of these estimates is too low by a significant amount, it would have a dramatic effect on savings, and H.R. 3200 could achieve its purpose of "bending the cost curve."
Let's hope our lawmakers can figure this out. And I would appreciate your insight into the CMS report itself.
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It's odd they can't or won't include projected federal administrative costs in the report, isn't it? Or the additional tax burden/revenues. Without knowing those, how do we figure what percentage of the GDP medical costs will represent, if that's the benchmark?
Larry, I think that the sole purpose of this report is to analyze how much Americans will be spending on health care – not how that spending may be reallocated or redistributed. So this is total spending, from all sources – individuals, government, and employers.
How do federal administrative costs not count?
Yes, you are right, administrative expenses related to health care would have to count. Tax burdens or revenues wouldn't count except to the extent that the money would be spent on health care.
I don't understand why the government can't seem to project administrative expenses. Your sentence about tax burdens and revenues simply muddies the water; of course I was talking about added taxes due to the reform, as noted in the report's introduction, and of course tax burdens also affect GDP in that they affect investment.