Two recent studies allow different conclusions on the cost of health care reform.
The first study, published in the Journal of the American Medical Association (JAMA), reports on the George W. Bush expansion of prescription drug coverage under Medicare – referred to as Medicare Part D. The researchers found that that the five year old Medicare Part D program resulted in significant reductions in non-drug medical spending for those who had limited access to drugs prior to the enactment of the law.
The researchers found that the program saves $12 billion dollars annually. The savings come primarily in reduced in-patient hospitalizations and emergency room use. The savings admittedly do not offset the $55 billion annual cost of the program. The study only looks at the savings to Medicare. It does not examine any other outcomes such as reduced mortality or quality of life improvements.
With more affordable access to prescription drugs, seniors can better manage chronic conditions and avoid acute episodes that might land them in the ER or in the hospital.
From Health Affairs
A more recent study published in the policy journal, Health Affairs, includes in its headline (academics prefer to call them titles) “Reform drive(s) faster spending growth.”
Is it any wonder that most news reports highlighted the spending growth? But “faster” growth is faster by a 0.1% – that is one tenth of one percent on a $2.6 trillion dollar health spend in 2010. If you were going 60 mph on the highway and increased you speed 0.1%, it would barely register on your speedometer.
White House Deputy Chief of Staff Nancy-Ann DeParle wrote on a White House blog post.
The bottom line from the report is clear: more Americans will get coverage and save money and health expenditure growth will remain virtually the same.
Senator Orin Hatch (R-UT) released a statement that had a different perspective. “The central promise of the White House’s partisan health law was that it would reduce health care costs, but unfortunately, as the report shows, this law is only making things worse.”
But John Nail points out in the employee benefits blog, bentelligence, some of the ROI on that 0.1%
- 30 million fewer uninsured Americans
- 300,000 saved lives
- fewer medical bankruptcies
- state based market reforms to improve access to health insurance
- improved consumer protections
- health care payment reforms and quality improvement initiatives
“This is a partial list of the most obvious ROI for this modest .1% investment or increase in costs over 10 years.
Thats right .1%! That translates into a few billion dollars a year:
- less than ethanol subsidies, or
- tax breaks for hedge fund managers or
- 10% of the cost of oil company subsidies
none of which add anything to GDP or any ROI for the American people.”
The Commonwealth Fund
But the Commonwealth Fund makes a point that others missed. The projections for 2020 made in 2011 are lower than the projections made in 2010 and in 2009. The slow down in the economy and the resultant record low growth rates for health spending in 2009 and 2010 (4.0% and 3.9% respectively) have lowered estimates for 2020.
As the author, Karen Davis, points out
“By using the higher 2009 health system spending baseline, analysts assumed that providing coverage for the uninsured and premium subsidies would be more expensive for the federal government than now appears to be the case. The offsetting revenue estimates, by contrast, are less sensitive to the slowdown in health expenditures—legislative provisions such as taxes on wealthy individuals, lower Medicare Advantage payments, and productivity adjustments for hospitals can still be expected to produce significant federal budget savings. If scorekeepers were to redo original estimates based on these new projections, the deficit reduction generated by health reform would be greater.”
The common thread
Buried in the Health Affairs article is a brief statement that reinforces a conclusion of the JAMA study on Medicare Part D:
“insurance expansion can typically lead to more efficient use of health care services.”
Are you listening Senator Hatch?
Photo credit: JL McGee – all rights reserved