The Medicare Actuary Weighs In

Stanley Feld M.D.,FACP,MACE

On April 22, 2010 Richard S. Foster CMS Chief Actuary issued a report entitled “On the Estimated Financial Effects of the Patient Protection and Affordable Care Act as Amended. “

Mr. Foster’s disclaimer introduces the report.

“Office of the Actuary has prepared this memorandum in our long standing capacity as an independent technical advisor to both the administration and the Congress. The statement, estimates, and other information provided in the memorandum are those of the office of the Actuary and do not represent an official position of the Department of Health & Human Services or the administration.”

The report is an independent assessment of the fiscal reality of President Obama healthcare reform plan. The report contradicts President Obama’s fantasy that a new entitlement will lower health costs. President Obama used a series of trick plays to feed the Congressional Budget Office unrealistic assumptions in order for the CBO to conclude his healthcare bill will reduce the deficit. The only way there can be a deficit reduction is greater tax increases for all Americans.

President Obama’s Healthcare Reform plan does not solve the healthcare systems problems. The present healthcare reform bill will make the problems worse and increase the deficit further.

Here are some of the Actuary Report findings:

1. President Obama claims health care costs will go down but the actuary says they will go up. National health expenditures will increase from 17 percent of GDP now to 21 percent under the new law. Healthcare costs will be higher than they would have been without the legislation. [Page 4] Net federal spending on health care will also increase by $311 billion dollars.

1. The healthcare reform bill will result in the loss of employer coverage by 14 million employees. Employees of small firms are especially at risk despite small employer tax credit subsidies. It is cheaper to pay the penalty than pay for the insurance[Page 7]

1. Two million employees who lose coverage will have to enroll in Medicaid. [Page 3] Medicaid enrollment will increase by 20 Million new beneficiaries. [pages 3-4]

1. Qualifying for a Medicaid insurance card is not a guarantee of medical care. There is no corresponding increase in the supply of physicians. Other health professionals will try to care for the additional Medicaid patients. The quality of medical care must be questioned.

1. A significant portion of the increased demand for Medicaid care would be difficult to service. [Page 20]. Physicians are not participating in Medicaid presently because of the low reimbursement. Further reductions in reimbursement will lead to further non participation. The government could try to force physicians to participate in Medicaid.

1. There are more than one-half trillion dollars in Medicare cuts scheduled. The new health law cuts “$575 billion” from Medicare. [Page 4]. The result will be lower reimbursement and rationing of care. President Obama did not address this comment when the bill was being passed.

1. Medicare Part A cuts would threaten the viability of 15% of hospitals. These Part A Medicare providers would become unprofitable within the 10-year projection period.” [Page 10]

1. 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]

1. 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 will be taxed. The percentage of workers taxed would increase rapidly thereafter.” [Page 13]

1. 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]

1. The reimbursement decreases will challenge Medicare providers to continue to take Medicare patients. Medicare providers will find it difficult to remain profitable and might decide not to participate in the program. [Page 10]

1. Enrollment in Medicare Advantage is planned to 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]

1. The new “Medicare Tax” doesn’t go to Medicare. Despite the Medicare tax title, the revenues generated by this tax on unearned income are not allocated to the Medicare trust funds. [Page 9]

1. 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 extending the trust using present accounting conventions.” [Page 9]

1. The new long-term care insurance plan (CLASS Act) faces “a significant risk of failure” because the high costs will attract sicker people and lead to low participation. [Page 15]

1. 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 healthcare insurance industry is still in control of the healthcare dollars.

These are just some of the Actuary Report finding

Despite President Obama’s repeated promises to curb healthcare costs and allow people to keep their current coverage, the President and Congress have enacted a healthcare law that will escalate healthcare costs, raise taxes, and decrease patient choice. President Obama’s political agenda ignores the will of the people.

The government takeover of healthcare heralds a financial disaster. There will be unsustainable spending and ballooning budget deficits. The financial disaster will not occur overnight. President Obama’s healthcare reform bill is spread out over many years. The increased taxes will be collected for four years before significant benefits will start.

This healthcare reform bill is fatally-flawed. It must be replaced with common-sense healthcare reforms that will solve the problems in a dysfunctional healthcare system. Instead we have a bill that will increase the systemic dysfunction.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.