Health Reform: The Cost of Failure and the Implications of Success Bowen Garrett John Holahan June 17, 2010 National Association for Business Economics www.healthpolicycenter.org
The Affordable Care Act (ACA): Key Features Medicaid Expansions Income related tax credits Exchange for individual and small group markets Insurance market reforms Individual mandate Employer penalties (more than 50 workers) 2
What Would Have Happened if Health Reform Had Failed? Under three economic scenarios over next ten years, we projected changes in: Premiums paid by employers Private coverage Number of uninsured Americans Medicaid/CHIP enrollment and spending Uncompensated care costs Out-of-pocket spending by individuals and families Results for years 2015 and 2020 3
Three Scenarios for Economic Conditions and Health Care Cost Growth Worst case Unemployment stays high (7.1%) in 2015, low growth in incomes, high growth rates for health care costs Intermediate case Unemployment at 6.1% in 2015, somewhat faster growth in incomes, but a lower rate of growth for health care costs Best case Return to full employment in 2015 (5.1% unemployment), faster income growth, even slower growth in health care costs 4
Assumptions Under Each Scenario 2010 to 2015 Unemployment rate (end of period) Income growth rate (annual) Private health spending per capita growth (annual) Out-of-pocket health care cost per capita growth (annual) Worst 7.1% 1.0% 7.0% 3.5% Intermediate 6.1% 1.5% 6.0% 3.0% Best 5.1% 2.0% 5.0% 2.5% 2015 to 2020 Worst 5.1% 1.5% 7.0% 3.5% Intermediate 5.1% 2.0% 6.0% 3.0% Best 5.1% 2.5% 5.0% 2.5% 5
Changes in Coverage, 2010-2020 All Non Elderly (percent of population) 60% 50% 40% 2010 Baseline 55.9% 2020 Best Case 53.3% 2020 Worst Case 48.3% Employer Medicaid/SCHIP Uninsured 30% 20% 20.3% 16.9% 18.4% 18.5% 23.7% 20.4% 10% 0% 6
Increase in the Number of Uninsured 2010-2020 (in millions) 80 70 60 50 Baseline 49.4 Best Case 57.9 Intermediate Case 62.5 Worst Case 67.6 40 30 20 10 0 7
Change in Medicaid/SCHIP Spending for Acute Care, Non Elderly 2010-2020 (in billions) 700 600 Best Case Worst Case $576 2010 2015 500 400 300 $424 $353 $278 $278 $403 2020 200 100 0 8
Change in Spending on Uncompensated Care For the Uninsured 2010-2020 (in billions) 140 120 100 80 60 40 20 Best Case $84 $111 $64 $64 Worst Case 160 2010 $97 $140 2015 2020 0 9
Premiums Employer-Sponsored Coverage 2010-2020 Single policy Family policy 2010 $4,800 $12,100 2020 Best Case $7,800 $19,500 2020 Worst Case $10,300 $25,600 10
Employer Spending on Premiums 2010-2020 (in billions) Best Case Worst Case 900 800 700 600 $560 $719 $608 $851 2010 2015 2020 500 400 300 200 100 0 $430 $430 11
Individual and Family Spending 2010-2020 (in billions) 600 500 400 Best Case $471 $387 $315 $315 Worst Case $564 $422 2010 2015 2020 300 200 100 0 12
Impact on the Economy Should be Small New federal spending net of payment reductions = $439 billion for 2014-2019 (CBO) Increase in National Health Expenditures = $311 billion from 2010 to 2019 relative to baseline (CMS) Gross Domestic Product will be $116 trillion 2014-2019 $178 trillion 2010-2019 Reform should shift resources to health sector and away from others, but effect is small Cost containment will do the reverse 13
The ACA is financed by Cuts in Medicare provider payment rates Taxes and fees on insurers, drug and medical device manufactures Excise tax on high premium plans Taxes on payroll and unearned income of those above $200,000 ($250,000 Families) 14
The Impact on the Deficit CBO projects deficit reductions of $143 billion over ten years; Coverage expansions more than offset by Medicare cuts and revenue increases Key issues Medicaid enrollment and expenditures Sustainability of Medicare cuts Inflation adjustment to excise tax and subsides after 2019 Cost containment provisions 15