Monday, September 13, 2010

Health Reform Will Slightly Boost Costs, Significantly Expand Coverage: CMS

Provisions of the Patient Protection and Affordable Care Act will boost national health care spending and some insureds' costs only slightly from 2010 through 2019, while expanding the proportion of the population with insurance, the Office of the Actuary for the Centers for Medicare and Medicaid Services (CMS) has projected. The increased cost of a greater number of insured individuals is partly offset by savings from Medicare and from lower Medicaid payments. In addition, CMS found that the main driver of increased costs will be the estimated $38 billion cost of establishing the new state health insurance exchanges.

The report, National Health Spending Projections: The Estimated Impact Of Reform Through 2019, published in the online version of the journal Health Affairs, also estimated that the average annual growth rate in health care spending over the next ten years would be 6.3%, just 0.2 percentage points higher than the February estimate.

By 2019, the CMS projects that 92.7% of the population will be insured, compared with 85.6% of the population in 2009, with 32.5 million more people insured. Also in 2019, health care costs will represent nearly 20% of the U.S. gross domestic product (GDP), compared with 17.5% of GDP in 2009. More than half of the newly insured population will be covered by Medicaid, and that program along with the Children's Health Insurance Program (CHIP) will insure 82.2 million people, compared with 51.8 million people in 2009.

Coverage through health insurance exchanges is estimated to rise from 15.8 million people in 2014 to 30.6 million in 2019. Coverage through employment will decline by only 100,000 people due to individuals shifting to coverage through Medicaid or through an exchange. Employer spending for health insurance is estimated to reach $1.2 trillion in 2019, with annual cost increases averaging about 4.8% in the ten years from 2009. In contrast, public funds will pay $2.3 trillion for health care in 2019.

Two provisions of the Affordable Care Act that take effect this year or next are projected to increase national spending to $10.2 billion through 2013: the high-risk pools for people with preexisting conditions and the coverage extension for dependent young adults up to age 26. Enrollment is expected to peak at about 375,000 people in the high-risk pools in 2011 and at about 1.5 million young adults in their parents' plans in 2013.

The major coverage expansions provided by the Affordable Care Act begin in 2014 and are expected to boost the growth in national health spending that year to 9.2%, compared with 6.6% growth expected prior to the enactment of health reform, the CMS noted. For years 2015 through 2019, national spending is projected to rise 6.7% annually, on average; the CMS' February projection had been 2.8%.

Rising enrollment will contribute to faster spending growth rates through 2016. However, the growth will slow substantially after that due to Medicare reduced payment updates for providers and the excise tax on high-cost insurance plans beginning in 2018, the CMS explained.

"In this analysis, we have shown that the net impacts of key Affordable Care Act and other legislative provisions on total national health expenditures are moderate, but the underlying effects on payer spending levels and growth rates are much more pronounced and reflect the Affordable Care Act's many substantive changes to health care coverage and financing," the CMS concluded. "As the provisions are implemented over time, their actual impacts may well differ considerably from these estimates."

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