CMS report raises doubts over Medicare savings claims

Senate Republicans have seized on a new report from the Centers for Medicare & Medicaid Services calling into question some of the savings Democrats claim would result from healthcare reform.
 
Most significantly, the report finds that national healthcare spending would increase slightly as a result of legislation passed last month by the Senate and questioned whether the legislation would achieve as much savings from Medicare as Democrats predict.
 

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The CMS report estimated that national health expenditures would increase by $222 billion or 0.6 percent from 2010 to 2019.
 
The Senate plan purports to achieve $483 billion in Medicare savings over the next 10 years, including $118 billion in cuts to Medicare Advantage plans, a program favored by Republicans that distributes Medicare benefits through private providers.
 
Richard Foster, the chief actuary at CMS, raised doubts about whether a significant number of healthcare providers could remain profitable if the proposed Medicare cuts went into effect.
 
“Providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and, absent legislative intervention, might end their participation in the program (possibly jeopardizing access to care for beneficiaries),” Foster wrote.
 
Congress would feel strong pressure from elderly constituents to boost payments if healthcare providers began to drop Medicare beneficiaries.
 
The report supports GOP criticisms that the Democratic health overhaul proposal is flawed because it would cut hundreds of billions from Medicare at a time when its long-term solvency is in question.

“Republicans uniformly, without exception, believe that cutting a half a trillion dollars out of Medicare, raising a half-trillion in new taxes, and an actual increase in health insurance premiums for everybody else is not reform,” Senate Republican Leader Mitch McConnell said in a statement.

Democrats argue that while national healthcare spending my tick up slightly, the Democratic plan will cut the federal deficit and make health insurance more affordable to individuals.

The Congressional Budget Office estimated the Senate plan would reduce the federal deficit by $132 billion over 10 years and the House plan would cut the budget by $139 billion over the same span.

In a radio address Saturday, President Barack Obama touted the money that families and small businesses would save.

“We’re fixing our broken health insurance system that’s crushing families, eating away at workers’ take-home pay, and nailing small businesses with double-digit premium increases,” Obama said.

The president also noted that people would begin to see certain benefits immediately, such as a prohibition on insurance companies from discriminating against patients because of pre-existing conditions and a provision allowing young adults to stay on their parents’ policies until ages 26 and 27.

The CMS actuary also found that healthcare providers could curb their availability or increase fees to respond to a flood of new consumers the healthcare reform bill is expected to send into the market. The Senate and House bills would expand health coverage to more than 30 million uninsured citizens, creating a potential glut.

“The additional demand for health services could be difficult to meet initially with existing health provider resources and could lead to price increases, cost-shifting, and/or changes in providers’ willingness to treat patients with low-reimbursement health coverage,” the report finds.

CMS did, however, give the Senate Democrats some ammunition for talks with the House over a final bill.

The repot found a proposed “excise tax on high-cost employer-sponsored health insurance would have a downward impact on future healthcare cost growth rates.”

An excise tax on high-cost plans, which would raise about $150 billion between 2013 and 2019, remains a major dispute between the Senate and House.

The Senate includes the excise tax while the House bill does not, relying instead on a 5.4 percent surtax on high-income earners.

Sen. Mary Landrieu (D-La.), a crucial swing vote in the Senate, has said she would not support a final bill that did not include the excise tax on high-cost plans because she believes it is an important mechanism for driving down future healthcare costs.

The CMS report, however, found the downward cost impact may take years to manifest.

“During 2010-2019 … these effects would be outweighted by the increased costs associated with the expansions of health insurance coverage,” Foster wrote.