April 23, 2010 Health Care Cost Increase Is Projected for New Law By
ROBERT PEAR

WASHINGTON — A government analysis of the new health care law says
it will not slow the overall growth of health spending because the
expansion of insurance and services to 34 million people will offset
cost reductions in Medicare and other programs.

The study, by the chief Medicare actuary, Richard S. Foster, provides
a detailed, rigorous analysis of the law.

In signing the measure last month, President Obama said it would “bring
down health care costs for families and businesses and governments.”

But Mr. Foster said, “Overall national health expenditures under
the health reform act would increase by a total of $311 billion,” or
nine-tenths of 1 percent, compared with the amounts that would otherwise
be spent from 2010 to 2019.

In his report, sent to Congress Thursday night, Mr. Foster said that
some provisions of the law, including cutbacks in Medicare payments to
health care providers and a tax on high-cost employer-sponsored coverage,
would slow the growth of health costs. But he said the savings “would be
more than offset through 2019 by the higher health expenditures resulting
from the coverage expansions.”

The report says that 34 million uninsured people will gain coverage
under the law, but that 23 million people, including 5 million illegal
immigrants, will still be uninsured in 2019.

Republicans said the report vindicated their concerns about the law,
which was approved without a single Republican vote. The White House
pointed to bright spots in the report and insisted that the law would
help bring down costs. In 2004, when Mr. Foster raised questions about
cost estimates by the Bush administration, Democrats lionized him as a
paragon of integrity.

Mr. Foster says the law will save Medicare more than $500 billion in the
coming decade and will postpone exhaustion of the Medicare trust fund
by 12 years, so it would run out of money in 2029, rather than 2017. In
addition, he said, the reduction in the growth of Medicare will lead to
lower premiums and co-payments for Medicare beneficiaries.

But, Mr. Foster said, these savings assume that the law will be carried
out as written, and that may be an unrealistic assumption. The cuts,
he said, “could become unsustainable” because they may drive some
hospitals and nursing homes into the red, “possibly jeopardizing access
to care for beneficiaries.”

Nancy-Ann DeParle, director of the White House Office of Health Reform,
said that fear was unfounded.

Mr. Foster’s report, which analyzes the effect of the law on national
health spending of all types, has a different focus from studies by the
Congressional Budget Office, which concentrated on federal spending and
revenues and concluded that the law would reduce budget deficits by a
total of $143 billion over 10 years.

In his report, Mr. Foster made these points:

¶The government will spend $828 billion to expand insurance coverage
over the next 10 years. Expansion of Medicaid accounts for about half of
the cost. The number of Medicaid recipients will increase by 20 million,
to a total of 84 million in 2019.

¶People who go without insurance and employers who do not provide
coverage meeting federal standards will pay $120 billion in penalties
from 2014 to 2019. Individuals will pay $33 billion of that amount,
while employers pay $87 billion.

¶The law will reduce consumers’ out-of-pocket spending on health care
by $237 billion over 10 years, to a total of $3.3 trillion.

Cuts in federal payments to private Medicare Advantage plans will
“result in less generous benefit packages,” the report said. By
2017, it said, “enrollment in Medicare Advantage plans will be lower
by about 50 percent, from its projected level of 14.8 million under the
prior law to 7.4 million under the new law.”