Rick Foster is the Chief Actuary of Medicare, and his office has just released a devastating critique of the Administration’s health reform law.
Before getting to details, let me say there is nothing in the report that is surprising to independent health economists. The conclusions are consistent with everything The Lewin Group and other private estimates have been saying for months.
What is surprising is that one of the most respected agencies of the U.S. government is completely undermining the Alice-in-Wonderland fables being spun by the White House, on Capitol Hill and in the mainstream media. To wit:
- You cannot take close to one trillion dollars away from one group of people and spend it on another group of people and somehow leave those footing the bill better off.
- You cannot give millions of people large increases in medical care without creating any new doctors, new nurses or other paramedical personnel.
- You cannot arbitrarily reduce what you are paying providers by billions of dollars and still expect to get the same quantity and quality of care.
- You cannot give millions of patients and thousands of doctors new incentives to waste medical resources and then expect health care spending to go down.
In other words, the Chief Actuary is simply saying reality is reality. Economics is economics. A is A.
Convenient summaries of the Actuary’s report have been produced by the Republican staff of the House Ways and Means Committee and by the Senate Republican Policy Committee. Although these are partisan groups, the summaries appear to be quite faithful to the source. Here are the salient findings (with page numbers in the Actuary’s report):
- Health care costs will go up, not down. National health expenditures will increase from 17 percent of GDP now to 21 percent under the new law and will be higher than without the legislation. [Page 4] Net federal spending on health care will also increase.
- Health care shortages are “plausible and even probable.” Because of the increased demand for health care, “supply constraints might initially interfere with providing the services desired by the additional 34 million insured persons.” [Page 20]
- 14 million employees will lose their employer coverage. Employees of small firms are especially at risk (despite small employer tax credit subsidies). [Page 7]
- 2 million employees who lose coverage will have to enroll in Medicaid. [Page 3]
- A Medicaid insurance card is not a guarantee of care. An estimated 18 million people will be added to Medicaid. [Page 3] However, because there is no corresponding increase in the supply of caregivers, “it is reasonable to expect that a significant portion of the increased demand for Medicaid would be difficult to meet, particularly over the first few years.” [Page 20]
- One in ten insured workers will see their health benefits taxed. By 2019, more than 10% of insured workers will “be in employer plans with benefit values in excess of the thresholds (before changes to reduce benefits) and this percentage would increase rapidly thereafter.” [Page 13]
- Higher taxes will lead to higher premiums. The new taxes on medical devices, prescription drugs, and insurance plans “would generally be passed on through to health consumers in the form of higher drug and device prices and higher insurance premiums.” [Page 17]
There are more than one-half trillion in Medicare cuts. The new health law cuts “$575 billion” from Medicare. [Page 4]
- Medicare cuts would threaten almost one in every seven hospitals. About “15 percent of Part A providers would become unprofitable within the 10-year projection period.” [Page 10]
- Overall access to care for seniors would go down. Because of the law’s payment reductions, “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. [Page 10]
- 7.4 million people will lose access to Medicare Advantage plans. Enrollment in MA plans will be cut in half (from its projected level of 14.8 million under the current law to 7.4 million under the new law). [Page 11]
- False advertising: The new “Medicare Tax” doesn’t go to Medicare. “Despite the title of this tax, this provision is unrelated to Medicare; in particular, the revenues generated by the tax on unearned income are not allocated to the Medicare trust funds.” [Page 9]
- False advertising: Budgetary double-counting does not improve Medicare’s solvency. Medicare cuts “cannot be simultaneously used to finance other federal outlays (such as the coverage expansions) and to extend the [life of the Medicare] trust fund, despite the appearance of this result from the respective accounting conventions.” [Page 9]
- The new long-term care insurance plan (CLASS Act) is unsound. The program faces “a significant risk of failure” because the high costs will attract sicker people and lead to low participation. [Page 15]
- The promise to those with pre-existing conditions is unfunded. “By 2011 and 2012 the initial $5 billion in Federal funding for [high risk pools] would be exhausted, resulting in substantial premium increases to sustain the program.” [Page 16]
- The law does almost nothing to limit actual fraud and abuse. The fraud provisions in the law will save only about two percent of $47 billion in suspect claims.
BRITISH MONARCHY’S WALL STREET
- Romney’s 5 best debate lines (politico.com)
- Individual Health Care Costs, Medicare Open Season and “Obamacare” (theradula.blogspot.com)
- Woodward: Obama planning to cut $250 billion from Medicare over 10 years (hotair.com)