U.S. Health Law Won't Curb Growth in Spending This Decade

The U.S. health overhaul that Democrats said would slow the rising costs of health care will have little overall effect on spending in the next 10 years, according to an analysis by government actuaries.

By 2019, U.S. health-care spending will make up almost $1 of every $5 spent in the country, or 19.6 percent, of gross domestic product, according to the report. Over the decade, costs will increase by 6.3 percent each year -- 0.2 percent faster than before the law was signed by President Barack Obama in March.

“The overall net impact is moderate,” Andrea Sisko, an economist with the Centers for Medicare and Medicaid Services’ Office of the Actuary, said at a press conference. The government analysis appeared today in the journal Health Affairs.

Reducing the rate of growth in health-care costs was a central goal of Obama’s overhaul championed by the administration and congressional Democrats. Proponents argued lowering costs for the public and private sector would keep the country from being overwhelmed by the expense of delivering health care.

The health law will reduce the amount of spending on each insured person, according to the Obama administration. In a blog post drawing data from the actuaries report, White House Office of Health Reform Director Nancy-Ann DeParle said that per person spending would drop by more than $1,000 in 2019, from $16,120 to $14,720, because the law increases the number of those covered.

Photographer: Brendan Smialowski/Bloomberg

White House Office of Health Reform Director Nancy-Ann DeParle said in a blog post, “This is great news for the millions of individuals and families who have struggled with the high cost of coverage.” Close

White House Office of Health Reform Director Nancy-Ann DeParle said in a blog post,... Read More

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Photographer: Brendan Smialowski/Bloomberg

White House Office of Health Reform Director Nancy-Ann DeParle said in a blog post, “This is great news for the millions of individuals and families who have struggled with the high cost of coverage.”

‘Great News’

“This is great news for the millions of individuals and families who have struggled with the high cost of coverage,” DeParle said in the blog post. The calculation cited by DeParle wasn’t included in the report prepared by the Medicare actuaries.

Richard Foster, Medicare’s chief actuary, has criticized the administration’s projections on the effects of the overhaul, predicting that it will save less money than supporters have argued.

Provisions of the bill such as a new Center for Medicare and Medicaid Innovation will take cost-saving pilot programs and implement them nationally. A new Independent Medicare Advisory Board will have power to set some payment rates. These programs may eventually tamp down the growth in spending, supporters said.

“We can’t estimate any savings from that, because nobody knows what will come out of it, but there’s a hope that something comes out of it,” Foster said on a conference call discussing the report.

More Coverage

Foster said that some of the increased costs come from raising the rate of insured people by 10 percentage points, to almost 93 percent. The health law will add 32.5 million people to rolls of the insured, according to the analysis.

“The major goal of doing something about the uninsured has been met in a big way,” he said. “When you cover that many more people and they now have insurance, they’re going to consume more services.”

Health-care spending will peak in 2014, when many new provisions of the health care law take effect, according to the analysis. That year, spending will go up by 9.2 percent, led by government spending on subsidies to help people buy insurance, enroll into Medicaid, and run the new programs.

While the growth in total spending will increase in 2014, the amount that covered individuals pay out of pocket will go down that year, and will increase more slowly in the next several years. People who have purchased insurance individually or have gone without it and paid for care on their own will instead get more help from government and employers.

Some of the spending growth isn’t attributed to the health care overhaul because the analysis takes into account all the changes to health law and regulation since February 2010.

For example, a regulatory decision changed how Medicare accounts for doctors’ use of drugs prescribed in the hospital. That change added from $140 billion to $150 billion to projected growth over the decade.

To contact the reporter on this story: Drew Armstrong in Washington at darmstrong17@bloomberg.net;

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