The New CMS Report Shows That Health Reform Was A Good Deal

Despite the GOP’s doomsday predictions about the health care law dramatically increasing health care costs, a new report from the Center for Medicare & Medicaid Services (CMS) predicts health spending will grow only “slightly faster than projected under prior law — at an annual rate of 6.3 percent, rather than 6.1 percent” — a fairly small price to pay for providing insurance coverage to 32.5 million more Americans. By 2019, health spending will “increase as a share of the economy by only 0.3 percentage points, to 19.6 percent of GDP,” the government found. Here is what it looks like:

To expand coverage to millions of Americans without significantly altering spending growth trends requires efficiences, and the law delivers. Beginning in 2014, as 30 million+ individuals begin receiving health care coverage and visiting doctors, health care expenditures will naturally increase. Costs will continue to grow higher than current law until around 2015, at which point the law’s efficiencies kick in — Medicare savings, the excise tax on so-called Cadillac health plans, the Medicare payment board — and costs begin to “decelerate.” As you can tell from the graph, between 2017 and 2019 the red line is below the blue line — the annual growth rate is decreased under reform for that period.

Moreover, the actuaries predict that as a result of these savings, Medicare spending will decline $86.4 billion from previous projections due to reforms. “Specifically, average annual Medicare spending growth is anticipated to be 1.4 percentage points slower for 2012–19 than we projected in February 2010. By 2019, it is projected to grow 7.7 percent — 0.9 percentage point more slowly than we projected in February 2010,” the report concludes.

Now, reform bends the cost curve for national health spending, but what this means for private health insurance premiums is more complex. As Merrill Goozner points out, “the private insurance market will absorb most of the increase, and most of that will fall on individuals.” The actuaries are projecting a “9 percent increase in out-of-pocket expenses in 2018 and 2019” as employers switch plans to avoid the Cadillac tax.


On the whole, however, this represents a fairly striking achievement and places the country on track to further lowering health care spending in the out-years. Much will depend on Congress’ commitment to maintaining the law’s cost savings and efficiencies — which the CMS may actually be under estimating — after all, they’re the only ways we can afford this kind of coverage expansion.