Reform to increase healthcare spending about $311B

President Obama’s healthcare reform plan is estimated to increase the overall national health expenditures under the health reform act by a total of $311 billion over the next decade, according to a report last week from Richard Foster, chief actuary of the Centers for Medicare & Medicaid Services (CMS).

According to the April 22 memorandum from the Office of the Actuary, this figure primarily reflects the net impact of greater utilization of healthcare services by individuals becoming newly covered, lower prices paid to health providers for the subset of those individuals who become covered by Medicaid and lower payments and payment updates for Medicare services.

CMS’ analysis estimated that 34 million previously uninsured Americans would become insured under the Patient Protection and Affordable Care Act (PPACA), which was enacted on March 30. According to the report, by 2019, mandates, coupled with the Medicaid expansion, would reduce the number of uninsured from 57 million, as projected under prior law, to an estimated 23 million under the PPACA.

“[T]he provisions in support of expanding health insurance coverage (including the Medicaid eligibility changes and additional Children’s Health Insurance Program funding) are estimated to cost $828 billion through fiscal year 2019,” wrote Foster.

“The Medicare, Medicaid, growth-trend, CLASS and immediate reform provisions are estimated to result in net savings of about $577 billion, leaving a net overall cost for this period of $251 billion before consideration of additional federal administrative expenses and the increase in federal revenues that would result from the excise tax or high-cost employer-sponsored health insurance coverage and other revenue provisions.”

The memorandum noted that the impact of the various tax and fee provisions nor the impact on income and payroll taxes due to economic effects of the legislation were factored into the analysis.

To read Foster’s full memorandum, click here.