Medicare Actuary Rick Foster is a respected, non-partisan analyst, and his report on the health overhaul law is a big deal because it shows that many of the promises made by the law’s proponents will be broken. Foster shows that businesses and families will face higher premiums, millions of people will lose their current coverage, seniors will have difficulty accessing care, and health spending will increase.
His analysis gives credence to the fears that led the majority of the American people to oppose passage of the law.
Foster’s analysis already is having an impact on decisions regarding implementation of the new temporary high-risk pools created by the health overhaul law. The law allocated $5 billion for the pools until 2014 when enrollees would be transferred into the new health insurance exchanges.
Foster estimates that the $5 billion “would be expended during the first 1 to 3 calendar years of operation.” That means states could be left to fill the funding void. At least 15 states have told HHS Secretary Sebelius they don’t want to be responsible for the added cost of the high-risk program and that they have a fiduciary responsibility to protect taxpayers in their states from yet another unfunded liability. The federal government is obligated by law to run the programs if the states decide they don’t want to contract to implement them.
Foster’s analysis also shows the new law falls far short in bending the health spending curve downward, as promised. He says that total national health spending will increase by $311 billion as a result of PPACA, thereby bending the curve up.
In fact, Foster warns that the cost of the health overhaul law may be much greater than advertised. It relies on more than $500 billion in Medicare cuts to help pay for the new spending. But these cuts “may not be fully achievable” because "Medicare productivity adjustments could become unsustainable even within the next ten years."
The report also highlights the shaky financial footing of the new long-term care insurance program – the CLASS Act. Foster says it will face "a significant risk of failure," resulting in "a very serious risk that the problem of adverse selection will make the CLASS program unsustainable." At a time of ballooning deficits and record debt, he finds the program will result “in a net Federal cost in the long-term.”
Foster’s report also shows that millions will be forced off their current plans due to the new law. He says about 14 million people will lose their employer coverage by 2019 as smaller employers terminate their plans and as workers who currently have employer plans enroll in taxpayer subsidized coverage. He warns, “The additional demand for health services could be difficult to meet initially with existing health provider resources and could lead to price increases, cost-shifting, and/or changes in providers’ willingness to treat patients with low-reimbursement health coverage.”
For seniors, Foster estimates that more than seven million will lose their current Medicare Advantage plans and that the “new provisions will … result in less generous benefit packages.” Recipients on traditional Medicare also will have trouble accessing care: Fifteen percent of all hospitals, nursing homes, and other providers treating Medicare recipients could be operating at a loss by 2019 and “possibly jeopardize access to care for beneficiaries.”
Foster’s report did not calculate the overall economic impact of many of the tax hikes the new law imposes, such as higher taxes on higher-incomes or on medical devices, pharmaceuticals, and health plans, or the dislocations to the job market as a result of the mandates and penalties on employers. But his report does point out that billions of dollars in new fees and excise taxes will “generally be passed through to health consumers in the form of higher drug and devices prices and higher premiums."
When Americans begin to feel the impact, they will see there was independent evidence of the false promises proponents made to gain votes to enact this unpopular legislation.
Published in National Journal Expert Blogs: Health Care, May 3, 2010.