The Spectacle Blog

HHS Actuary Finds Senate Bill More Expensive Than “Unsustainable” Status Quo

By on 12.11.09 | 10:48AM

The chief actuary for the Centers for Medicare and Medicaid Services, a division of the Department of Health and Human Services, has estimated that if the Senate health care bill became law, it would make the United States health care system more expensive than if we simply did nothing -- undermining the primary rationale for Obama's health care push.

In a report released last night, which reaches similar conclusions to its analysis of the House bill, CMS found that if the Senate health care bill passed, America would spend $234 billion more on health care over the next 10 years than if we did nothing.

As Obama put it in his June speech to the American Medical Association, "If we fail to act, one out of every five dollars we earn will be spent on health care within a decade." Yet if we adopt the Senate bill, spending will actually rise to 20.9 percent of GDP, according to CMS, compared to 20.8 percent if we simply do nothing.

CMS, which oversees Medicare and Medicaid, also found that if the proposed cuts to hospital payment rates go into affect, then medical providers would start losing money and be forced to drop Medicare. Specifically, it said that 20 percent of providers to Medicare's hospital insurance program "would become unprofitable within the 10-year projection period."

By 2019, CMS estimates the bill would insure 33 million more people, while still leaving 24 million without insurance. Of the 33 million who have new insurance, 18 million would be added to the Medicaid rolls.

CMS also suggest that the CLASS Act insurance program was actuarily unsound, contrary to the claims of its supporters. The CLASS Act, a program envisioned by Ted Kennedy, has received less attention in the health care debate, but it is essentially a new entitlement program contained within the larger health care entitlement bill. Should the health care bill become law, Americans would be enrolled in a governement-run insurance program in which they would pay premiums that would enable them to collect long-term care benefits down the road, though people would be allowed to opt out.

The program would start collecting premiums immediately but wouldn't begin paying out benefits right away, so it would initially run a surplus. But CMS found that by 2025, "projected benefits exceed premium revenues, resulting in a net Federal cost in the longer term."

CMS suggested that this problem could be compounded because the program would tend to attract sicker patients -- a problem known as adverse selection. The report said, " there is a very serious risk that the problem of adverse selection would make the CLASS program unsustainable."

"Make no mistake: The cost of our health care is a threat to our economy," Obama told AMA. "It's an escalating burden on our families and businesses. It's a ticking time bomb for the federal budget. And it is unsustainable for the United States of America."

But now the chief actuary in his own HHS department has said that the legislation he backs would make this problem even worse.

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