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Court ruling won’t alter costs

By Jay MacDonald ·
Friday, June 15, 2012
Posted: 10 am ET

The upcoming Supreme Court decision on health care reform will have little impact either way on the rising cost of health care in the United States, according to a new federal study.

The report by independent economists at the Centers for Medicare and Medicaid Services, or CMS, estimates that America's annual health care costs are expected to continue to climb over the coming decade, regardless of the fate of health care reform.

By 2021, our annual health care bill is estimated to reach $4.78 trillion if the Affordable Care Act is upheld by the court or $4.72 tillion if the justices toss it out. Both are more than double the $2.8 trillion we're projected to spend on health care this year.

The findings take some steam out of the election-year rhetoric regarding the immediate economic impact of the Affordable Care Act. Critics claim health care reform will drive up health care costs significantly while supporters claim it will lower costs eventually. The study suggests that the truth lies somewhere in between.

"The growth rate of national health spending is projected to be fairly similar with or without the Affordable Care Act," according to Sean Keehan, lead author on the report.

Between 2014 and 2021, CMS estimates that per-household spending on health insurance premiums will increase 6.8 percent on average every year.

Medicare spending is projected to grow by 6.9 percent annually between 2014 and 2019 as more and more baby boomers sign on. That number would have been worse, the report says, but for provisions in the health care law and a 2011 budget deal that cut hundreds of billions of dollars from the program over the coming decade.

At the same time, Medicaid spending is projected to surge 7.3 percent annually as more lower-income Americans qualify for federal health care subsidies. An estimated 30 million uninsured Americans are expected to gain health coverage under the Affordable Care Act beginning in 2014. Many of those will be eligible for Medicaid subsidies that will be available to those making up to four times the federal poverty line, or $92,200 for a family of four.

The report says that after 2014, total health care spending is projected to grow more slowly with health care reform than without, due to the law's "medical loss ratio" provision, which requires insurers to spend at least 80 percent of premiums directly on health care, and a new tax on high-cost "Cadillac plans" scheduled to begin in 2018.

As for the potential cost savings of other health care reform provisions, including establishing Accountable Care Organizations designed to help doctors and hospitals work together more efficiently, Keehan says it's too soon to predict their impact.

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1 Comment
J. L. Carter
June 23, 2012 at 2:30 pm

If Mr. MacDonald and the CMS staff who did the study were as old as I am, they would recall that MEDICARE cost sixteen (16) times what the studies (estimates) indicated. The statement "The study suggests that the truth lies somewhere in between." what proponents and oponents are saying is laughable in view of the record of past "studies" of government programs passed into law and the results of those programs.