HR 3962's Massive Expansion Of Coverage Would Result In Very Small Increase In Health Care Spending

I don't know why anyone is surprised by the CMS's conclusion that HR 3962 would result in a very minor increase in overall national health care spending.

The estimated effects of H.R. 3962 on overall national health expenditures (NHE) are shown in table 5. In aggregate, we estimate that for calendar years 2010 through 2019 NHE would increase by $289 billion, or 0.8 percent, over the updated baseline projection that was released on June 29, 2009. Year by year, the relative increases are largest in 2015, when the coverage expansions would be fully phased in (1.5 percent), and gradually decline thereafter, as the effects of the Medicare market basket reductions compound, reaching 1.3 percent in 2019. The NHE share of GDP is projected to be 21.1 percent in 2019, compared to 20.8 percent under current law.

The increase in total NHE is estimated to occur primarily as a net result of the substantial expansions in coverage under H.R. 3962, together with the expenditure reductions for Medicare. Numerous studies have demonstrated that individuals and families with health insurance use more health services than otherwise-similar persons without insurance. Under the health reform legislation, as noted above, an estimated 34 million currently uninsured people would gain comprehensive coverage through the health insurance Exchange, their employers, or Medicaid.

The bill would increase the number of Americans with health insurance by roughly 10%, but would only increase overall national health expenditures by 0.8%. That seems like a very cost-effective increase in coverage. I know the Republicans have seized on this report to attack the bill, but, if anything, the great increased cost to increased coverage ratio seems like an argument for reform, not against it.

Frankly, I'm surprised the bill would increase overall health care expenditure by so little. There seems to be a strong bipartisan concession against taking serious steps to rein in our health care costs. Single payer was not even considered. The negotiated rates public option, which is 5% more cost effective that private health insurance, is limited to only a small segment of the market. The Blue Dog Democrats refuse to support a public option based on Medicare rates, which could have really brought down cost.

The pharmaceutical industry was protected from efforts that could easily bring down the cost of drugs in this country by anywhere between 20-50%. The new bipartisan pathway for biosimilars is a joke. It will save the country almost nothing. The exchange lacks a robust risk adjustment mechanism, which would have forced competition based on efficiency instead of risk selection. Most importantly, our system lacks a central provider payment negotiator, which is how almost every industrial nation keeps their health care cost so much lower.

For what HR 3962 does, which is dramatically expand the number of people with health insurance coverage, it does it with only very minor increase in national health care spending. Despite the Republican talking point, it is not some liberal overreach--this reform bill is extremely modest reform that leaves statue quo mostly unchanged. If the Democrats are serious about reducing health care cost, they need to actually embrace proven progressive solutions.