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September 13, 2010

Washington Health Policy Week in Review Archive 4ae4e977-b446-4138-ab86-e167f96934b9

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CMS Report Finds Health Spending Will Grow Slightly Faster Under New Law

By Jane Norman, CQ HealthBeat Associate Editor

A new paper by independent government economists and actuaries projects that the new health care law will push the growth of national health spending slightly higher during the next decade rather than curbing it.

But administration officials pointed out it also forecasts that Americans will have lower per capita out-of-pocket spending on their health care needs and affirms that nearly 33 million uninsured Americans will acquire health coverage when the law is implemented.

The economists and actuaries at the Centers for Medicare and Medicaid Services say they expect U.S. health spending will grow by 6.3 percent annually during the next decade. That is above the 6.1 percent they projected prior to enactment of the law (PL 111-148, PL 111-152) and other legislative changes earlier this year, including a revision of a Medicare physician payment formula.

The national spending figures account for all payers, private and public, and are annually estimated by CMS.

Additionally, the paper puts a price tag on what it will cost administratively to roll out the law, in Washington and in state capitals. Administrative costs for the health care overhaul at the Department of Health and Human Services are pegged at $2.4 billion over the decade, along with $37.7 billion in state and federal costs for operating the health exchanges and an increase of $31 billion in Medicaid state and federal administrative costs over the same period.

In the paper published in the journal Health Affairs, CMS says overall U.S. health care spending will climb to $4.6 trillion by 2019 and health care will account for 19.6 percent of the gross domestic product. Prior to the health law's enactment, CMS had said health care would account for 19.3 percent of GDP by 2019.

While the new CMS conclusions echo earlier projections of the law's impact made by the agency's chief actuary, Richard S. Foster, they arrive less than two months prior to the midterm elections and likely will reignite Republican criticism of the law's cost and impact. Republicans in recent days have been stepping up attacks and unleashing ad campaigns targeted at Democrats who backed the law as its popularity sags in recent polls.

Andrea M. Sisko, a CMS economist, said in a briefing for reporters that the law did not seem to have a substantial effect on overall spending in its first decade. However, "while these impacts are relatively moderate on net, the underlying effects on coverage and financing are more pronounced," she said. For example, more insured persons will mean more health spending, but that is offset by slowed Medicare spending and lower Medicaid reimbursements to providers, she said.

By 2019, CMS foresees that 92.7 percent of the population will be insured, 10 percentage points higher than before the law was passed. Enrollment in the health exchanges is expected to top 30 million Americans, and enrollment in the public programs Medicaid and the Children's Health Insurance Program will expand by a third to 82.2 million, CMS said. The number of uninsured is projected to decline from 56.9 million to 24.2 million.

At the White House, Nancy-Ann DeParle, director of health care reform, said that the new projections were consistent with earlier CMS conclusions that have provoked unhappiness among Democrats who sought to bend the health care cost curve. But she said the paper confirms a central point about the new law, and that's that it will make health care more affordable for people with insurance.

DeParle said in a blog post on the White House website that the report indicates per capita health care spending will average $14,720 instead of the $16,120 that CMS expected prior to enactment of the law.

"This is great news for the millions of individuals and families who have struggled with the high cost of coverage," she said. In addition, she said CMS expects that out of pocket health care spending per capita will decline an average of 6 percent to $1,310.

It's also significant that the report "confirms that 33 million Americans who are living without health insurance today will gain coverage by 2014," said DeParle.

"While this will result in a short-term increase in spending (as uninsured people begin to receive the care they have postponed or gone without), the rate of growth in spending will slow in the second half of this decade," she said. "This means more money in people's pockets instead of more insurance company profits."

The CMS projection says that health spending will shoot up in 2014 when millions of people gain insurance, so there will be a 9.2 percent increase in spending that year. Out-of-pocket spending will also decline because more people are insured. From 2015 through 2019, national health spending will grow by 6.7 percent, slightly less than the earlier forecast of 6.8 percent prior to enactment of the health care law. That's due to a reduction in Medicare spending growth.

Some have feared that the law would produce a shift away from employer-sponsored health insurance but the CMS report didn't find that, forecasting that about 165 million Americans will remain in such insurance in 2019.

Temporary high-risk insurance pools set up for sick people who can't otherwise get insurance will draw some 375,000 enrollees in 2011, CMS projects. Also a new provision extending coverage to young adults under their family insurance policies is expected to cover 1.5 million people in 2013, CMS said.

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Obama: Slowing Health Care Costs Is 'Hard to Do'

By Jane Norman, CQ HealthBeat Associate Editor

September 10, 2010 -- President Obama on Friday said that "bending the cost curve on health care is hard to do," and the administration's goal in the health care law is to "slowly bring down those costs."

Millions of uninsured Americans will gain coverage under the new law, Obama said. And "at the margins that's going to increase our costs, we knew that." Nonetheless, the long-term trends for how much families will pay for their coverage will be improved because of the law, he said.

Obama's remarks at a press conference came in response to a report earlier this week by government actuaries and economists that the law (PL 111-148, PL 111-152) will push national health spending to grow by 6.3 percent annually through 2019. That's slightly above the 6.1 percent growth predicted prior to the law's passage and other legislative action on health care.

Republicans have seized upon the Centers for Medicare and Medicaid report as evidence of "Democrats' health care cost problem," in the words of the Senate Republican Communications Center, and contend it contradicts promises that the president and Democrats made that the law would help reduce health care costs.

Senate Republicans quoted Obama saying on March 3, "My proposal would bring down the cost of health care for millions: families, businesses and the federal government."

The CMS paper was published in the journal Health Affairs.

Obama said he's been saying the same thing all along, that it's difficult to tame spiraling costs. "We've got hundreds of thousands of providers and doctors and systems and insurers," he said. "And what we did was we took every idea out there about how to reduce or at least slow the costs of health care over time.

"But I said at the time, it wasn't going to happen tomorrow, it wasn't going to happen next year. It took us decades to get into a position where our health care costs were going up 6, 7, 10 percent a year. And so our goal is to slowly bring down those costs."

The goal is to keep costs rising at the level of inflation or slightly above, he said, which would be "huge progress."

White House officials after the press conference circulated a blog posted by commentator Ezra Klein of the Washington Post in which Klein said that "I don't think President Obama's answer was particularly clear" and pointed out that spending will substantially increase in 2014 when the exchanges are created. After that, from 2015 through 2019. Spending is projected to increase 6.7 percent annually, which is less than the 6.8 percent growth expected prior to enactment of the health law, Klein said.

Nonetheless some recent polls have found support for the law sagging. Asked about Democrats who are avoiding the topic of the health law or expressing their opposition to it, Obama said lawmakers have to make their own political calculations.

"We're in a political season where every candidate out there has their own district, their own makeup, their own plan, their own message," he said. "And in an environment where we've still got 9.5 percent unemployment, people are going to make the best argument they can right now."

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Health Care Battle Framed as a Jobs Issue on the Campaign Trail

By Rebecca Adams

September 10, 2010 -- With voters identifying the economy and jobs as their top concerns this election cycle, opponents of the new health care law are attempting to link the two by reprising their argument that the overhaul will be a "jobs killer."

National Republican Campaign Committee spokesman Paul Lindsay says voters will see "Republican candidates and their allies holding Democrats accountable for the job-killing effects of the government health care takeover."

The message is being supported by groups that share the philosophy. "Everything we talk about, all our political messaging, comes back to the health care law," said Stephanie Cathcart, spokeswoman for the National Federation of Independent Business, which joined a lawsuit challenging the law. "It's an obvious example of something that has passed and is increasing costs" for employers.

Democrats, meanwhile, are countering by saying the law will help businesses with costs that have been rising for years. "The idea that this kills jobs is ridiculous," said Erikka Knuti, spokeswoman for the Health Information Campaign, a new group that plans to spend $125 million over the next five years, including $2 million on ads it has already produced, defending the law.

Last year the liberal Center for American Progress estimated that the law could create an average of 250,000 to 400,000 new jobs per year over the next decade, with job growth accelerating throughout the period. House Speaker Nancy Pelosi, D-Calif., used those numbers when the law was passed to say it would add four million jobs, including "400,000 jobs almost immediately."

Now those words are being used against her., a group that wants Congress to strip funding for the law, released a web ad last week showing her making the prediction, followed by clips of Republicans challenging it. It features Rep. Peter Roskam, R-Ill., on the House floor with closed eyes. "See if you hear the sound of jobs. Shhh," he said. "Well, I don't hear anything."

The group is targeting Democrats in competitive districts, such as Reps. Rick Boucher and Glen Nye of Virginia and Chet Edwards of Texas.

A Complicated Question

The reality is that it's probably too soon to assess the law's long-term economic effects. Some provisions will benefit businesses directly, and others will cost them. However, health policy experts and academics do not expect it to have a major net impact on job creation, either positively or negatively, in the next couple of years.

"Despite fears expressed by some in the political arena, health reform is not likely to have a significant direct effect on the U.S. economy or on employment," wrote Urban Institute researcher John Holahan in August. "The changes in spending and taxes in health reform generally have offsetting effects and are simply too small relative to the overall size of the economy to have much of an impact."

On the positive side, businesses can benefit this year from a temporary reinsurance program for firms that give coverage to retirees over age 55 who are not eligible for Medicare.

The law also includes a small-business tax credit that took effect this year. However, the Congressional Budget Office estimated last year that in 2016, only about 12 percent of people who get coverage in the small group market would benefit, in part because the credit is temporary and limited to firms with fewer than 25 workers who earn less than an average of $50,000.

Some business owners say the law creates general uncertainty, and they fear it could raise their administrative costs. This year, changes in insurance rules will require many companies to revise their policies at a time when they are usually already sending out details about coverage.

In the longer run, the law's impact is complex. Businesses with 50 or more workers will typically have to pay for insurance for their workers starting in 2014 or potentially face a fine, but smaller businesses would be exempt from the requirement.

New insurance exchanges could allow some small companies to buy insurance at group rates that are less than they would otherwise pay or could allow some workers to buy insurance on their own.
The law's effect on large employers, who provide most private coverage in the United States, is expected to be minimal.

Within the health care sector itself, the law will lead to greater coverage and a greater demand for medical services, which should increase jobs. But it also contains stricter Medicare cost controls and new taxes and regulations on companies such as medical device and drug manufacturers, which could reduce jobs.

Over the next 10 years, wrote Holahan, there will be "many other forces that will have a much greater impact on economic activity" than changes in health care. These are subtleties, though, that are likely to be lost in the noise of the campaign trail.

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Sebelius Calls on Health Insurers to Halt 'Scare Tactics' on Premium Hikes

By Jane Norman, CQ HealthBeat Associate Editor

Health and Human Services Secretary Kathleen Sebelius fired off a letter to the nation's health insurance trade association Thursday warning that there will be "zero tolerance" for "unjustified rate increases" and "misinformation" about the health care law.

In her letter to America's Health Insurance Plans, Sebelius cited reports that some carriers are sending letters to enrollees "falsely blaming" proposed premium hikes on the new laws (PL 111-148, PL 111-152). While the most sweeping provisions of the law don't kick in until 2014, some key insurance changes will go into effect on Sept. 23, including a ban on canceling coverage for sick people unless fraud is involved, and coverage of most adult children up to age 26 under their parents' policies.

The Sebelius and the industry have been at sharp odds off and on during the health care battle of the past year and a half, though tensions seemed to have eased in the past couple of months. That may be changing as some of the law restrictions on health insurers approach reality.

Some top HHS officials, including Donald M. Berwick, the administrator of the Centers for Medicare and Medicaid Services, are scheduled to appear before health insurers next week at a major meeting on Medicare and Medicaid sponsored by AHIP.

"I ask for your help in stopping misinformation and scare tactics about the Affordable Care Act," said Sebelius. The Obama administration and states "will not tolerate unjustified rate hikes in the name of consumer protections," she said.

Sebelius said that according to government and some private analysts alike, "any potential premium impact from the new consumer protections and increased quality provisions under the Affordable Care Act will be minimal."

HHS estimates that the effect will be no more than a 1 or 2 percent increase, Sebelius said. She said that's consistent with estimates from the Urban Institute and Mercer consultants as well as some insurers' estimates. And any premium increases will be offset by out-of-pocket savings resulting from the law, she said.

Earlier Thursday, AHIP spokesman Robert Zirkelbach circulated a defense of premium hikes, saying that "health insurance premiums are not arbitrary decisions" and are "based on actuarial calculations that take into account a variety of factors, including the type and amount of coverage purchased, the cost of providing medical care, and changes in the risk pool."

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Medical Liability Costs Estimated at $55.6 Billion Annually

By Jane Norman, CQ HealthBeat Associate Editor

September 7, 2010 -- A new study on medical liability pegs its total cost to the health care system at $55.6 billion annually, or about 2.4 percent of total health care spending, an estimate much lower than those used by Republicans to argue in favor of tort reform.

The study by Harvard University professors and others was published Tuesday in the Health Affairs Journal. The authors said that they attempted to pin down costs because there's new interest in changes in the medical liability system that could help trim health costs. They also said that good estimates of the cost of medical malpractice are hard to come by but are needed to understand its impact on overall spending.

The study took a look at how much is paid out to patients who file malpractice claims; the cost of attorneys' fees, other legal fees and insurers' overhead; the cost of medical services ordered by doctors to reduce their risk of being sued; and other costs, some of which can't be quantified. For example, they didn't try to estimate "reputational and emotional costs" for doctors who are sued, or benefits of the current system such as "corrective justice" for people who have been injured.

The authors said what they found is that malpractice reform might not be as overwhelming a burden as it's portrayed in the physician community, but it's not insignificant, either. They expressed doubt that much savings can be wrung out of changes in the system.

"Physician and insurer groups like to collapse all conversations about cost growth in health care to malpractice reform, while their opponents trivialize the role of defensive medicine," said Amitabh Chandra, a professor of public policy at Harvard's Kennedy School of Government, in a statement. "Our study demonstrates that both these simplifications are wrong — the amount of defensive medicine is not trivial, but it's unlikely to be a source of significant savings."

The other authors are Michelle Mello, a Harvard School of Public Health professor of law and public health; Atul Gawande, an associate professor of surgery at Harvard Medical School; and David Studdert, a professor at the University of Melbourne School of Law and School of Population Health in Australia.

The American Association of Justice, which represents trial lawyers, said in a statement that the study shows that "the liability system is hardly a contributor to America's skyrocketing health care costs."

Republicans in the past have said that medical liability costs soar far higher. For example, Sen. John Ensign, R-Nev., said on the floor in December that estimates of the costs of unnecessary tests are $100 to $250 billion annually. Most of the tests are ordered because of fear of lawsuits, he said.

The study put the annual cost of defensive medicine on the part of both hospitals and physicians at $45.6 billion.

Separately, the American Medical Association, which advocates caps on damages, has estimated that pressures related to liability increase health system costs by between $84 billion and $151 billion a year.

The health care law (PL 111-148, PL 111-152) includes a five-year demonstration project that will allow states to evaluate what could be done differently in handling medical liability claims. The Department of Health and Human Services will award grants to states for pilot programs.

A second study in Health Affairs reports that doctors remain worried about being sued even in states that have instituted caps on economic damages awarded in malpractice lawsuits.

"Whether justified or not, physicians' liability fears are a policy problem because defensive medicine raises health care costs and potentially subjects patients to unnecessary care," said Emily R. Carrier, a coauthor and senior researcher at the Center for Studying Health System Change.

The study concluded that "many policies aimed at controlling malpractice costs may have a limited effect on physicians' malpractice concerns."

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Primary Care Access Doesn't by Itself Equal Better Treatment, Dartmouth Study Says

By John Reichard, CQ HealthBeat Editor

September 9, 2010 -- Despite strong evidence that primary care doctors can play a key role in providing high-quality care, access to primary care doesn't by itself assure better treatment outcomes, says a study released Thursday by Dartmouth College researchers.

The study found that "neither a greater supply of primary care physicians in an area nor a regular visit to a primary care clinician is, by itself, a guarantee that a patient will get recommended care or experience better outcomes." The study was based on data between 2003 to 2007 on patients in the traditional Medicare program.

The study doesn't dispute the importance of primary care, which many analysts say is key to a more efficient system that better manages chronic illnesses. But its message is that more careful attention should be paid to the services primary care physicians actually deliver and to improving their efforts to coordinate the treatment services received by the patient.

"Primary care clinicians, whether they are general internists, family practiced physicians, pediatricians, physician's assistants or nurse practitioners, are trained to care for the whole patient," the study notes. "They can diagnose and treat a wide variety of illnesses, help patients avoid getting sick, and ensure that they get the specialty care they need. For chronically ill patients in particular, primary care clinicians serve a crucial role as coordinators of specialty care."

During the period studied, 78 percent of Medicare enrollees had at least one visit to a primary care clinician during a given year, the study said. However, regional differences in that regard were large.

The rate of primary care visits ranged from 60 percent of beneficiaries in the Bronx to 90 percent in Florence, South Carolina, a difference of about 50 percent between the highest and lowest cost regions, the researchers said.

But access didn't necessarily correlate to quality. As examples, the study looked at such measures as the percentage of women that get a mammogram at least once every two years. In doing so for women of ages 67-69, it found no relationship between rates of breast cancer screening and the amount of primary care delivered. Similarly, it found no relationship between rates of A1c testing, which tracks management of diabetes by assessing blood sugar levels, and the amount of primary care delivered.

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