WASHINGTON -- The healthcare reform law will not slow the growth of healthcare spending in the next decade -- in fact, it will accelerate healthcare spending slightly -- but it will also significantly expand healthcare coverage, a new government report found.
The report, issued by Centers for Medicare and Medicaid Services (CMS) Office of the Actuary, casts doubt on predictions from the Obama administration and Congressional Democrats that healthcare reform would slow the trajectory of healthcare spending.
The CMS analysis pegs healthcare spending growth at an average rate of 6.3 percent over the next decade, or 0.2 percentage points faster than healthcare spending would have grown had the Affordable Care Act (ACA) not become law.
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Put another way, nearly 20 percent of the United States gross domestic product (GDP) -- or one in five U.S. dollars spent -- will be devoted to healthcare costs in 2019. That projection is 0.3 percentage points higher than pre-reform projections.
However, the projection -- which was published Thursday in the policy journal Health Affairs -- does support another promise of reform -- to expand coverage to 32 million people.
The CMS actuaries who wrote the report estimate that nearly 93 percent of the U.S. population will have health insurance in 2019, which is an additional 32.5 million above the current number of insured people.
This is the second 10-year health spending projection released by CMS this year. The first, which was released in February, did not account for the impact of the Affordable Care Act (ACA), which was signed into law in March.
The main driver of increased spending this latest report is the estimated $38 billion cost for establishing the new health insurance exchanges. Close behind is the expected $31 billion increase in the cost of Medicaid. Under ACA, any person under the age of 65 who has an income under 138 percent of the federal poverty level will be eligible for Medicaid.
Taken together, the insurance exchanges and the Medicaid expansion, provide the new structure that will provide care to the uninsured.
Healthcare reform could bring down costs after 2019, but the CMS researchers didn't look beyond the next decade.
The projection outlines some healthcare spending patterns that will likely emerge over the upcoming years as a result of the ACA.
For example, in 2010, healthcare spending is estimated to grow at a rate of 5.8 percent, but it's scheduled to slow in 2011 to 4.2 percent.
But there are problems with that projection since spending slow-down hinges on a planned 23 percent pay cut for physicians who treat Medicare patients going into effect. In June, Congress passed a law to update physician Medicare rates by 2.2 percent, but that temporary fix runs out on Dec. 1. Come January 1, 2011, physicians would also be slapped with an additional 3 percent cut in Medicare reimbursement.
If history is any indication, Congress will likely vote again to override the cut, likely making the projection that healthcare spending will slow in 2011 no longer applicable.