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Crystal Balls Swirl with Conflicting Overhaul Cost Predictions

By John Reichard, CQ HealthBeat Editor

June 8, 2010 -- With voters increasingly stressed about the deficit, the cost of the overhaul law remains a hot topic in Washington — but sharply varying predictions aren’t lending clarity to the budget debate. Speakers at a health policy forum Tuesday talked up estimates ranging anywhere from trillions in savings to trillions in added deficit spending. Harvard University economist David Cutler, one of the speakers at the forum sponsored by the policy journal Health Affairs, called a 1.5 percentage point reduction in health care cost growth a reasonable target as health information technology gradually makes health care more efficient.

Doing so would save the federal government $580 billion in 2010-2019, $3.5 trillion in 2020-2029 and $4.9 trillion in the decade after that, Cutler estimated in a paper released at the forum. The savings reflect a 30 percent reduction of medical spending — the part of the health care dollar spent on unjustified care, Cutler said.

Cutler tied his prediction to at least a couple of caveats, however. "First, the administration must move forward rapidly with the design and operation of the pilot programs and demonstration projects, and with needed internal reforms," he wrote. "It takes five to 10 years from concept to results; this cycle must be cut to a year or less," he added "Such streamlining is feasible, but it will require an enormous change in agency culture."

Cutler added that doctors and hospitals and big private insurers and other health care purchasers "must actively participate in the change to new models of care delivery."

But estimates that the law will cut the deficit are wishful thinking, Michael J. Ramlet, co-author of a paper with Douglas Holtz-Eakin, said in his remarks.

Stripping out the law's funding "gimmicks and budgetary games" would add $554 billion to the deficit in the first 10 years and $1.4 trillion over the next 10 years, Ramlet said in the paper written with Holtz-Eakin, the former Congressional Budget Office (CBO) director and adviser to John McCain's presidential campaign.

Dubious provisions of the law include "unachievable savings, unscored budget effects, uncollectible revenue and already reserved premiums," the paper said.

White House Office of Health Reform Director Nancy-Ann DeParle focused in her remarks on an estimate that the law would yield health system savings greater than suggested by the $143 billion in 2010-2019 deficit reduction forecast by the CBO.

DeParle noted an estimate by the Commonwealth Fund that the law would trim overall health care spending in the United States by $590 billion in its first decade, including $400 billion from federal spending. The Commonwealth study faulted other estimates for giving "almost no weight to proposals for improving the information available to providers and modifying the financial incentives in the current system."

With estimates varying based on different assessments about how providers and others will respond to efforts in the law to make care more efficient, it's likely that estimates will continue to vary in the future — and that doubts about the impact of the law will remain a fixture of the health care debate for years to come.

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