The Centers for Medicare and Medicaid Services has issued another report estimating the financial and coverage effects of the health care reform bill as adopted by the Senate on December 24, 2009. The good news is that CMS believes that the Senate bill will expand health insurance coverage to 34 million more people. The biggest disappointment is its conclusion that prevention and wellness programs will not reduce the overall cost of medical care.
Here is the new CMS report as posted by Modern Health Care. The report estimates the effect that the health care reform bill adopted by the Senate would have on federal expenditures and total health care expenditures, as well as predicting how many more people will be covered by health insurance.
The report states that the Senate bill would extend health insurance coverage to an additional 34 million people. One third of the gain is achieved by expanding Medicaid and CHIP to ten million more people, and two-thirds by opening up "exchanges" for over 20 million persons to purchase non-group health insurance, most of whom will qualify for government subsidies. (Page 3 of the report). The 34 million increase in persons with health insurance is one million more than would have received coverage under the prior version of the bill. (See Page 3 of the December 10, 2009 CMS report on the November 18 Senate bill.)
Roughly 23 million people would remain uninsured, instead of over 56 million people under current law. CMS explains who those 23 million people are:
For the estimated 23 million people who would remain uninsured in 2019, roughly 5 million are undocumented aliens who would be ineligible for Medicaid or the Exchange coverage subsidies under the proposed legislation. The balance of 18 million would choose not to be insured and to pay the penalty (if applicable) associated with the individual mandate. For the most part, these would be individuals with relatively low health care expenses for whom the individual or family premium would be significantly in excess of any penalty and their anticipated health benefit value. (Page 7 of CMS report).
CMS estimates that 67% of persons eligible to purchase insurance through the Exchange would do so. According to CMS it is people within a narrow income range – about between 365% and 493% of the federal poverty level – who will be most likely to forego coverage. People earning just under 400% of the federal poverty level will qualify for only small subsidies, and those earning more than 400% of FPL will receive no subsidies. If these people are relatively healthy, they may choose to pay the penalty of $750 per person rather than purchase health insurance. Furthermore, if the cost of health insurance would exceed 8% of their income, they would not even have to pay the penalty. (Page 7)
CMS also estimates that the final Senate bill will be about $80 billion cheaper than the previous bill was – spending $40 billion less on coverage, and saving $40 more on Medicare and Medicaid over the ten year period 2010-2019. (See page 2 of each CMS report.) CMS believes that the proposed law would have very little impact on total health care expenditures. On the one hand this is bad news – we have to bring down the cost of health care for our economy to remain competitive. One the other hand this is good news – we will be covering far more people with much better health insurance for about the same amount of money.
One of the significant disappointments in the report is that the CMS does not believe that any of the bill's cost-cutting measures will have a significant effect on health care expenditures. CMS predicts that Comparative Effectiveness Research – identifying the most effective and most efficient drugs and practice protocols – will save only about $8 billion over ten years, and that none of the other cost-cutting measures will any appreciable effect. Most disappointing of all is that CMS predicts that no savings will result from the law's emphasis on preventive care and wellness programs. CMS states:
There is no consensus in the available literature or among experts that prevention and wellness efforts result in lower costs. Several prominent studies conclude that such provisions – while improving the quality of individuals' lives in important ways – generally increase costs overall. For example, while it is possible that savings can be achieved for many people by diagnosing diseases in early stages and promoting lifestyle and behavioral changes that reduce the risk of serious and costly illnesses, additional costs are incurred as a result of increased screenings, preventive care, and extended years of life. (Page 13)
Now there's a pessimistic atttude. CMS believes that if we make better lifesyle choices and become healthier as a result, we will live longer and will therefore incur greater medical expenses. I suppose CMS's advice for us to reduce total health care expenditures is to "Eat, drink, and be merry!"
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.
{ 7 comments… read them below or add one }
Of course preventative medicine doesn't reduce costs because it is treating everybody for ailments that only a few would develop without it. It is not only commonsense but studies showing that have been around since the beginning of the debate. I think Politifact or someone called Obama's claim that it would reduce costs the second biggest lie of the year. But of course the Death Panel hyperbole got all the attention when in fact the rationing that hyperbole points to is also a commonsense fact of government "efficiencies."
RE:"For example, while it is possible that savings can be achieved for many people by diagnosing diseases in early stages and promoting lifestyle and behavioral changes that reduce the risk of serious and costly illnesses, additional costs are incurred as a result of increased screenings, preventive care, and extended years of life. "
Sounds like a perfect financial storm with no chance of saving a buck. If I accept that premise I can follow one of two paths. I can eat junk food, drink corn syrup, and be a merry couch potato until stress, diabetes, or hypertension kills me in my 60s….or I can eat better, drink more water, and merrily exercise my life away into my 80s with an occasional joint replacement. If the total cost is the same, I think I'll go for the added years of life.
After reading all of 'Page 13', I now realize that the CMS was only doing a projection for a ten year period. I can see that lifestyle changes for currently unhealthy adults may not be enough to bend the cost curve in just ten years. However, I would like to see projections of how lifestyle modifications and preventative care would affect the future medical costs for the younger population. I think the CMS is doing a disservice by implying that taking better care of ourselves will not help reduce the future cost of healthcare.
I don't know that anyone would argue that preventative medicine isn't a wise course to take on an individual basis. Whether it is a cost-saving strategy as far as government policy is more the question, I think. It is the mammogram question. Statistically, testing all women in the country for breast cancer at a certain age is a very expensive proposition that, combined with treating those who test positive, might actually cost more than simply treating those who would develop the cancer and are treated at later stages. Yet on an individual basis, it is of course wise to be tested every year because catching the disease early can result in the avoidance of catastrophic costs and a possibly much longer life.
You would think that facing this dilemma would be a foregone conclusion as legislators ponder making healthcare decisions for its citizenry on a mass scale. The more decision-making power the government has in facing this dilemma, the more likely it is that decisions will be made on the basis of mass efficiencies rather than individual well-being. Yet this aspect of reform is glossed over by supporters and the powers that be, who prefer to demonize those who try and call attention to the dilemma through the hyperbolic term "death panels."
RE:"The more decision-making power the government has in facing this dilemma, the more likely it is that decisions will be made on the basis of mass efficiencies rather than individual well-being."
I suppose that is 'always' true when viewed through the eyes of macro economists. It would also be true when applied to soldiers on a battlefield and travelers boarding planes at large airports. The welfare of the majority nearly always trumps the desires of the individual. It is rational to believe that not all individuals will receive equal consideration in all of the above scenarios. There must be 'death panels' aka 'steering committees' aka 'resource rationeers' or whatever else you want to call them to make grass roots decisions at the functional level of any dilemma. You can't make everybody happy all of the time.
I believe many of us are losing sight of the fact that this particular 'reform package' will not be the end-all of the national healthcare dilemma. Like any new release of a complex computer application suite, there will need to be syntax corrections, security fixes, and process enhancements. Nothing this big can be perfect out of the box. If we can offer current standards of basic health insurance coverage to millions of presently uninsured Americans and 'break even' with projected cost estimates, then I think we have made a tremendous first step. This is not legislation that cannot be changed after reviewing the results of the first attempt. The mammogram question is just one of many that will need to be dealt with as 'maintenance releases' for the upcoming master program.
I think you are right in many regards and that most folks realize the dilemma and the probability that the healthcare cost curve is not going to be affected in a good way without such hard decisions. Yet all we hear from our leaders who support this reform are the pipe dream of "cutting waste" and vague plans to create efficiencies through computer technology and the like. There has been little honest debate about the ramifications and costs, and fewer Americans are buying into reform as time goes on.
larry and Dan,
Thank you both for the discussion.