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Failure to Overhaul Health System Would Be Costly, Study Says

By John Reichard, CQ HealthBeat Editor

May 21, 2009 -- Rejecting a costly overhaul of the health care system might seem like the fiscally prudent thing to do but sticking with the status quo would be an expensive alternative, according to a new study by researchers from the Urban Institute.

Without an overhaul, up to 66 million Americans could be uninsured by 2019 and total individual and family spending on premiums and out-of-pocket costs could increase 68 percent under a worst-case scenario according to the study, which was prepared for the Robert Wood Johnson Foundation (RWJF). The study assumes that 49 million people this year are without insurance, based on adjusting 2007 figures for coverage losses from recent increases in unemployment.

"If federal action is not taken, many Americans would lose their employer-sponsored insurance over the next decade and move to Medicaid and other government programs," said Urban Institute researcher John Holohan. "Middle-income families would be truly stuck—too well off to be eligible for public programs, but too poor to afford their own health insurance."

The study said that the number of middle-income earners without insurance would rise from 12.5 million in 2009 to as many as 18.2 million in 2019.

The study explores three different economic scenarios in examining what would happen without a health overhaul. The worst-case scenario presumes that unemployment rates between 2009 and 2014 remain high, falling to 7.1 percent in 2014, and that income growth during that period is slow, with health costs rising somewhat faster than projected by the Centers for Medicare and Medicaid Services (CMS).

The best case assumes unemployment rates fall to 5.1 percent by 2014, that income growth is faster, and that health costs grow at rates consistent with those projected by CMS. The intermediate scenario presumes that the unemployment rate is 6.1 percent by 2014, with incomes and health care costs growing at rates between the best and worst case scenarios. The study makes a similar set of assumptions for the 2014 to 2019 period.

Under the best case, 53.1 million people would be uninsured in 2019 and in the intermediate case, 62.2 million. Even under the best case scenario, individual and family spending on premiums and out-of-pocket costs would likely increase at least 46 percent, the study said.

Businesses could see health costs double within 10 years. The researchers said "employer spending on premiums would increase from $429.8 billion in 2009 to $885.1 billion in 2019 in the worst-case scenario, and to $740.6 billion in the best case."

Spending on government programs also could double as more Americans are priced out of private insurance and become eligible for government programs. Spending in Medicaid (for the non-elderly) and in the State Children's Health Insurance Program would increase from $251 billion in 2009 to $519.7 billion in 2019 in the worst case scenario and to $404 billion in the best case.

And in the worst-case scenario, the amount of uncompensated care would rise from $62 billion in 2009 to $141 billion in 2019 in the worst case, and to $107 billion in the best case, "putting a tremendous strain on health systems, hospitals, providers of clinical care, and local municipalities," the RWJF said in a news release.

At a forum Thursday on the findings, Urban Institute President Robert Reischauer said that lost in the health overhaul discussion is any examination of "what happens if we do nothing. Most simply assume that well, we'll pretty much be left with what we have today." But the study shows that's not the case—"more are going to find themselves uninsured, thus adding to the uncompensated care burden facing many providers, and more will end up on government-subsidized programs," Reischauer said.

An overhaul would add to expenditures, but they would be devoted "to more of the things that we want to buy" including more coverage, improved quality of care for all, and investment in information systems that could moderate long-term cost growth he said. An overhaul also would have less measurable results, such as reducing stress and anxiety by reducing uninsurance and underinsurance, Reischauer added.

"The lesson of the study is just when you think things can't get worse, they can," said Karen Ignagni, president of America's Health Insurance Plans. "And I think that's the message that needs to go to Capitol Hill and to the country about wasting or not taking advantage of this opportunity to pass health care reform."

Len Nichols, an economist with the New America Foundation, said "politicians who think they want to sell the status quo are going to have a harder time selling that" because of the study.

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