Government Economists Say Health Overhaul Won’t Significantly Increase Spending

The health overhaul legislation and other changes made by Congress and regulators since February will have only a “moderate” effect on the nation’s health tab through 2019, government economists say in a new study.

In all, the changes will increase annual growth in health spending by about 0.2 percentage points on average, bringing the rate to 6.3 percent, said the economists, who are members of the Office of the Actuary at the Centers for Medicare and Medicaid Services. Their findings were published today in the journal Health Affairs.

The economists’ conclusions conflict with the claims of Republicans who said the Democratic health law would unleash a steep climb in health spending. But, they also draw into question President Barack Obama’s contention that people who like their plans can keep them: though the impact on spending is modest, the analysts foresee an array of changes in insurance industry and employers’ offerings.

“The effects on health spending are moderate,” said Andrea Sisko, the lead author of the report, “but the underlying effects on coverage are more pronounced.” That means health insurers will offer different types of plans or cancel current offerings, some workers will likely shoulder more costs, and millions of otherwise uninsured people will have coverage.

The health law and other changes would, by 2019, the latest year projected, increase health spending as a share of the economy by only 0.3 percentage points, to 19.6 percent of GDP. Though the increase is modest as a percentage, the overall rise in the nation’s health spending — including both government and private expenses — will rise by $617 billion between now and then, the economists said. In 2019, health spending is expected to total $4.6 trillion.

Their predictions include the impact of the health law as well as the costs of delaying a scheduled 21 percent cut to physician Medicare pay, the extension of subsidies for people who retain employer coverage after losing their jobs, and a change in how drugs physicians administer are paid for by Medicare. The drug change alone was responsible for more than $140 billion of the increased spending.

In a conference call with reporters, the economists said their projections focus on the entire health system, rather than just federal spending, which is the Congressional Budget Office’s domain. They also said they were not able to isolate the costs of the overhaul, known as the Affordable Care Act, from other legislative and regulatory changes.

Richard Foster, Medicare’s top actuary, who was not an author of the report, noted in a press conference Wednesday that the projections did not deviate that much from the CBO’s estimates.

Paul Ginsburg, president of the Center for Studying Health System Change, has cautioned that many of the changes the CBO and Office of the Actuary attempt to predict may not come to pass because there’s a dearth of evidence. When both offices drafted predictions for the 2003 Medicare drug law, for instance, they were off target by tens of billions of dollars.

The economists also offered these predictions:

– New health insurance exchanges for individuals and small businesses could see an influx of 16 million people in 2014, and up to 30 million by 2019. Foster said individually purchased private insurance plans may cease to exist as a result.

– By 2018, after a spike in the growth of health spending resulting from an expansion of insurance coverage, spending should begin slowing. One big reason is that the so-called Cadillac tax on high-cost insurance plans will kick in. The economists expect insurers and employers to shift more costs to policyholders to avoid the tax.

– Around 100,000 fewer people will have employer-sponsored coverage by 2019 because more people will be shifted to Medicaid or the exchanges than will gain coverage in that market.

– The administrative costs of implementing the overhaul will total up to $37.7 billion, money that will be spent largely on setting up state-run insurance exchanges.

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