Health Care Financing Reform: (64) CMS Report on H.R. 3962 – Expanded Coverage, No Effect on Total Cost of Health Care

     The Centers for Medicaid and Medicare Services has released its report on the effect of H.R. 3962, the health care reform bill adopted by the House of Representatives.  There is very good news and very bad news. 

     Here is a link to the full report, "Estimated Financial Effects of the 'America's Affordable Health Choices Act of 2009 (H.R. 3962), as Passed by the House on November 7, 2009," and here is a summary of the report.

THE GOOD NEWS – 34 MILLION MORE PEOPLE WILL BE INSURED, AND EVERYONE WILL HAVE THE OPPORTUNITY TO PURCHASE BETTER HEALTH INSURANCE

      If enacted into law, the law would expand health insurance coverage to 34 million more Americans and improve coverage for everybody – there would be no limitation on coverage of preexisting conditions or lifetime coverage limits, and people's out-of-pocket medical expenses would have an upper limit of $5,000 for an individual and $10,000 for a family. 

     The principal means that the law uses to extend health insurance are to expand eligibility for Medicaid to persons earning up to 150% of the Federal Poverty Level and to offer federal subsidies to low income persons to purchase coverage through the Exchange, a regulated marketplace for health insurance.  Large employers will be more likely to offer health insurance, but small employers and employers who employ lower-wage workers may drop insurance coverage so that workers can qualify for Medicaid or for federally-subsidized health insurance through the Exchange.

THE BAD NEWS – THE BILL WILL HAVE ALMOST NO NET IMPACT ON TOTAL HEALTH EXPENDITURES, AND DOCTORS MAY BE HARD TO FIND

     The CMS (and many other agencies and organizations) have estimated that if we do nothing, under current law spending on health care will double over the next decade.  Although H.R. 3962 contains many cost-saving provisions, CMS believes that these savings will be offset by expanding access and increased utilization, and that total health care costs will increase at approximately the same rate that they would without any changes to the law.  In fact, CMS predicts that under this law total health care costs will be eight-tenths of one percent higher than they would be if we do nothing.

     Acknowledging that the reforms will significantly expand access to health care, the report states that "the additional demand for health services could be difficult to meet initially with existing health provider resources and could lead to price increases, cost-shifting, and/or providers willingness to treat patients with low-reimbursement health coverage."  The report concludes:

With the exception of the proposed reductions in Medicare payment updates for institutional providers, the provisions of H.R. 3962 would not have a significant impact on future health care cost rates.  In addition, the longer-term viability of the Medicare update reductions is doubtful.

     The House bill largely solves one of the problems this country faces – the problem of access to health care – but I think it's clear that we have more work to do to find a way to reduce the total overall cost of health care.

Visit Professor Huhn's website on health care financing reform for links to information about proposed legislation, studies and reports, public agencies, and private organizations concerned with this issue.

Tagged as: 3962, centers for medicare and medicaid services, cms, cost estimate, H.R. 3962, health care financing reform, health care reform, health insurance reform