Health Law to Save $120 Billion in Initial Years

Medicare, the U.S. health insurance program for the elderly and disabled, said the health-care law will save the program $120 billion in the next five years through lower payments to hospitals and insurers.

About $50 billion of the savings come from reduced payments to insurers including Humana Inc. (HUM), WellPoint Inc. (WLP) and UnitedHealth Group Inc. (UNH), companies that lead the market in enrollees in Medicare Advantage, the privately run, government- subsidized portion of the U.S. health program.

The savings prove the health-care overhaul that Democrats passed last year is working, Medicare Deputy Administrator Jonathan Blum said.

“Savings are happening,” he said by phone. “The program is becoming more efficient. We are promoting payment reforms that are elevating quality, elevating performance and lowering costs.”

Cutting spending in Medicare was a major priority of the health-care overhaul U.S. President Barack Obama signed into law in March 2010. The law is projected by the Congressional Budget Office to reduce U.S. deficits by $143 billion, partly through almost $500 billion in cuts and savings from the Medicare program in a decade.

Other major savings in the law come from cutting payments to hospitals and providers of medical equipment like oxygen and wheelchairs.

Blum said the savings were in line with expectations by the Obama administration. “We’re very much consistent with where we thought we would be,” he said.

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

To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net.

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