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Will Reform Cut Health Care Costs? Don’t Bet on It

The good news about health care reform is that, if it passes, the ranks of the uninsured will be reduced. The bad news is that reducing the surging cost of health care in the United States will remain iffy, at best.

[IMGCAP(1)]There’s reason to fear that, even with reform, the nation’s total outlays for health care — currently 17 percent of gross domestic product — will continue to soar, and so will federal health spending and insurance premiums.

The Obama White House promised reform would “bend the curve— of health spending — now growing 3 percent a year faster than the economy — but bills pending in Congress contain no guaranteed cost-containment measures such as a global budget, or national lid, on health spending.

According to the Congressional Budget Office, total U.S. health spending is scheduled to rise to 20 percent of the GDP by 2018, 25 percent by 2025 and 38 percent by 2050.

In May, health care stakeholder groups, including hospitals, insurance companies, doctors, drug companies and device makers, promised President Barack Obama they’d institute measures shaving 1.5 percent per year from the current 7 percent growth rate of health spending, saving $2 trillion over 10 years.

But as the journal Health Affairs observed in an issue brief in August, “these agreements are not enforceable— and, indeed, House “reform— legislation would free doctors from any reductions in Medicare reimbursements.

It’s no wonder the American Medical Association supports the House bill, H.R. 3200. The Senate Finance Committee bill gives doctors just a one-year break from scheduled fee reductions, but past patterns are that Congress annually saves doctors from any cut.

Another group promising cuts — and now supporting Obamacare — is the Pharmaceutical Research and Manufacturers of America.

Its contribution to controlling health care costs? Just $80 billion over 10 years — out of total U.S. pharmaceutical outlays of $3.3 trillion.

And, as Fortune magazine pointed out, part of PhRMA’s cuts are designed to get more Medicare recipients to use brand-name drugs when generics actually would be cheaper.

According to Health Affairs Editor-in-Chief Susan Dentzer, “bending the curve— of health cost growth depends upon “a lot of floating magic asterisks— in the Senate legislation, including the transformation of several pilot projects into actual policies that alter health spending patterns.

She noted that the Senate Finance bill “creates the framework— for “bending the curve,— but “there’s no action-forcing mechanism.—

Similarly, a report just issued by the Brookings Institution pointed to “many promising ideas— in the bill written by Finance Chairman Max Baucus (D-Mont.).

These include the creation of an Independent Medicare Advisory Council to impose cost cuts, subject only to Congressional veto, and an institute to study the comparative effectiveness of various medical procedures.

But the report also noted the absence of any medical liability reforms, payment reform to cut reimbursements to high-cost providers or “accountability incentives— to encourage consumers to be cost-conscious.

And, even if a cut-imposing IMAC is in the Senate’s final bill, House leaders are adamantly opposed to it because it infringes on legislative authority.

Meantime, in terms of cost to the U.S. government, a new comparison of pending bills issued by the Committee for a Responsible Federal Budget shows that, at best, reform would take only a tiny nick out of federal deficits in its first 10 years.

Using CBO estimates, the report showed that the Senate Finance draft would cut the deficit by just $49 billion over 10 years.

The House’s “tri-committee— bill would increase the deficit by $239 billion, and the Senate Health, Education, Labor and Pensions measure would increase it by as much as $1.1 trillion.

The CBO estimates bigger savings from the Senate bill in its second 10 years — up to $1.3 trillion — but its director admitted that the figure was highly speculative.

At present, according to the government’s Center for Medicare and Medicaid Services, the cost of Medicare alone is scheduled to rise from $466 billion in 2008 to $931 billion in 2019, and cost $6 trillion over that period.

No bill currently in Congress contains anything that will significantly bend that growth curve.

And rising health costs mean rising insurance premiums. In fact, according to the insurance lobby America’s Health Insurance Plans, to the extent that doctors and hospitals do get paid less under Medicare, the costs will be shifted to private patients.

The fact is, extending insurance coverage to 30 million to 50 million new people, which Congress should do, is going to increase usage of health care services.

And higher demand means higher costs — unless Congress figures out some enforceable cost-containment mechanism, which hasn’t happened yet.

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