What The CMS Report Tells Us About The House Health Bill

costcont2On Friday, the Center on Medicare and Medicaid Services (CMS) released a new “estimate of the financial and coverage effects of the non-tax provisions” in the House health care bill. According to the report, “total national health expenditures in the U.S. during 2010-2019 would increase by about 0.8 percent.” The cost-containment measures in the bill “would not have a significant impact on future health care cost growth rates”:

The increase in total NHE is estimated to occur primarily as a net result of the substantial expansions in coverage under H.R. 3962, together with the expenditure reductions for Medicare…..The availability of coverage would typically result in a fairly substantial increase in the utilization of health care services, with a corresponding impact on total health expenditures. These higher costs would be partially offset by the sizable discounts imposed on providers by State Medicaid payment rules, together with the significant discounts negotiated by private and public health insurance plans.

Higher utilization from the additional 34 million newly insured enrollees will bend the cost curve slightly up, and, with the exception of the proposed reductions in Medicare payment updates for hospitals, the bill does not do enough to manage utilization or the cost of health care services, the report concludes. It’s a valid point, and one that the Senate health care bill will address with an excise tax on Cadillac health care plans and a Medicare Commission tasked with controlling Medicare-related spending. CMS doubts that the health care industry could “improve their own productivity to the degree achieved by the economy in large” and predicts that the productivity adjustments in the House bill could lead some Medicare providers “for whom Medicare constitutes a substantive portion of their business” to stop seeing Medicare patients.

But the report is not without its positives, and lawmakers must accept the bad with the good. If the CMS analysis suggests that reform legislation should adopt robust cost-containment provisions, it also applauds the bill for expanding coverage by building and strengthening the current public/private system. The report is a wake-up call for reformers as much as it is a full and complete rejection of critics who argue that the House bill will undermine the existing health care system:

– The bill covers 34 million Americans.

– Overall out-of-pocket spending would decline more than $200.

– It extends the life of the Medicare trust fund by 5 years until 2022.

– It invests in comparative effectiveness research without “rationing care.” Such research will reduce national health expenditures by $8 billion between 2010 and 2019.

– The number of Americans in employer-sponsored coverage will increase by 2.5 million.

– Rather than crowding-out private insurers, the public plan would compete on a level playing field and attract about 6 million enrollees. (The report concludes that public plan premiums would be 4% higher than private because it would attract sicker applicants)

– Public expenditures could rise by just 3 percentage points in 2019, or stay the same. Expenditures from private health insurance could actually increase.

– Under the bill, expenditures through Medicare and Medicaid would reduce national health expenditures by roughly 2.1% in 2019.

The CMS report confirms that the House health care bill is a fairly modest proposal that expands access to insurance and builds on what works in the current system. Now, honest lawmakers — who believe in health care reform — must ensure that reform also lowers costs for families and reduces long term health care spending.

Rather than complain about a fictitious government takeover of health care and rationing care to seniors, Sens. Olympia Snowe (R-ME), Susan Collins (R-ME), Joe Lieberman (I-CT) and other ‘moderate’ lawmakers should use this report to insert stringent cost-control mechanisms into the final bill. The report relieves them of their deepest fears (and Luntz-inspired talking points) and challenges them to address the real problems in the health care reform bill.