Actuary Report, Round II

The Actuary of CMS (Medicare and Medicaid) has released a revised report on the expected impact of the Senate bill should it become law. Similar to the last one, projecting an increase of $222 Billion in total health spending over the period 2010-19 (they estimated ~+$240 Billion in early December, but I can't lay my hands on the original report this second). It is important to keep in mind that the default spending over this period if reform is defeated will be $35 Trillion, $260 Billion.

Let me say that again: if we do nothing, the actuary says total health spending from 2010-19 will be $35 Trillion, 260 Billion.

The actuary is saying if the Senate bill became law, spending over the same time period will be $35 Trillion, 482 Billion, and 36 Million people will be insured in 2019 who will be uninsured if the bill doesn't become law.

The report notes that there are some aspects of the bill that will have the effect of slowing the rate of spending growth: the Independent Medicare Advisory Commission; the tax on high cost insurance policies; and very small reductions from increased use of comparative effectiveness research. There are other policy aspects that many think will slow growth in the first decade that are credited with no savings here, just as with CBO. They both take fairly conservative perspectives, which is fair enough. But, these changes are more than offset in the first 10 years by newly insured folks and folks with better insurance.

If the Senate bill became law and that was it, it won't be much of a cost slowing victory. The provisions of the Senate bill are a first step that give us a chance to begin addressing cost inflation in a meaningful manner over the long term (next 30-40 years). One of the side benefits and realities of passing reform is that the health system will be in play. I would expect every Congress for the next 5 to pass tweaks or changes (or who knows, maybe the Republicans will take both Houses in 2010 and repeal it all, and then what?) and that is needed and necessary because this is an imperfect bill. But, it is far preferable to the status quo. That is in the easy call category for me.

The most interesting difference between the actuary and the CBO is that the CBO says 31 Million people will be covered in 2019 who will otherwise be uninsured. The Actuary report puts this number at 36 Million , which is quite a big difference. They seem to be showing more uptake of private coverage which is essentially saying they expect the individual mandate to be more effective than CBO does.

Also, note that the Actuary is focused on spending and not revenue/deficits. CBOs bottm line focus is the effect of proposed legislation on the deficit, while the Actuary is focused on total spending.

As I said in this column, you can address coverage without cost, but you can't hope to fundamentally address cost so long as you have systematic uninsurance with people still receiving care. The Senate bill has more on cost control than say, the Massachusetts plan had (which was pretty much straight coverage expansion) but it is not enough. Our nation will have to pay ruthless attention to cost inflation for the rest of my life if we are to achieve fiscal sanity. The Senate bill is a step in this direction. A first one, not the last one (by a long shot).