Highlights Of CMS Analysis Of Senate’s Bill

The CMS released its analysis of the Senate health care bill. (One big caveat about this report is that it does not take into account any “deal” that Reid may or may not have reached on the public option.) Overall the report is a mixed bag.

National health expenditure and coverage expansion

National health expenditures would be very slightly higher in 2019 than without reform:

In aggregate, we estimate that for calendar years 2010 through 2019, NHE would increase by $234 billion, or 0.7 percent, over the updated baseline projection that was released on June 29, 2009.

A 0.7% increase is extremely tiny, and I would dare say well within the CMS margin of error. The bill does a decent job of expanding coverage.

The percentage of the U.S. population with health insurance coverage is estimated to increase from 83 percent under the current baseline to 93 percent after the changes have become fully effective.

The fact that we are getting a 10% increase in the number of Americans who have health insurance with only a 0.7% increase in NHE is a pretty cost-effective expansion in coverage.

Excise tax on benefits

The excise tax that was much extolled as a way to “bend the cost curve” is basically a failure on that front. It would also cause millions of people to get lower quality health insurance.

We estimate that, in aggregate, affected employers would reduce their benefit packages in such a way as to eliminate about three-quarters of the current excess benefit value. The resulting higher cost-sharing requirements for employees would have an initial, significant impact on the overall level of health expenditures. Moreover, because health care costs would generally increase faster than the CPI plus 1 percent, we anticipate additional, incremental benefit coverage reductions in future years to prevent an increase in the share of employer coverage subject to the excise tax. These further adjustments would contribute to a small reduction in the growth in health care expenditures for affected employees through at least 2019. In 2019, these impacts would reduce total NHE by an estimated 0.3 percent.

That is a pathetic reduction in NHE. For example, Byron Dorgan’s drug reimportation amendment alone would save American consumers $100 billion over the next decade and produce an equal or greater reduction in NHE than the excise tax.

Employer Mandate

The employer mandate is too weak, and that would result in some companies and employees dropping coverage because employees could get subsidized insurance on the exchange for less:

As a result, the penalties would not be a significant deterrent to dropping or forgoing coverage. We estimate that such actions would collectively reduce the number of people with employer-sponsored health coverage by about 17 million, or somewhat more than the number newly covered through existing and new employer plans under the PPACA. As indicated in table 2, the total number of persons with employer coverage in 2019 is estimated to be 5 million lower under the reform package than under current law.

Industry Fees

Finally, the flat, across-the-board, industry fees (which were likely part of Obama’s secret industry deals) that will mostly just be passed on to consumers:

We anticipate that such fees would generally be passed through to health consumers in the form of higher drug and device prices and higher insurance premiums, with an associated increase of approximately $11 billion per year in overall national health expenditures beginning in 2011.

Overall, the report points to a lot of problems with the bill, several especially in line with many progressive criticisms. Still, it is important to remember that a 0.7% increase NHE is within the margin of error for any complex project. It shows a bad bill can still greatly expand insurance coverage without noticeably increasing our national health care spending. Imagine what could be done with a good bill that is not full of massive corporate give aways.

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