White House Council: Senate Bill Will Lower Health Costs

Janice Simmons, for HealthLeaders Media , December 15, 2009

While the Senate's healthcare reform bill has come under scrutiny over the past week about whether it will contain costs, a report from the White House Council of Economic Advisers released Monday suggested that it actually will slow medical spending growth over the next decade.

Taken together, the combination of Medicare- and Medicaid-related provisions in the Senate bill are estimated to "reduce the annual growth rate of federal spending on both programs" by 1% in the upcoming decade and "by an even greater amount in the subsequent decade," the report said. Overall, these savings "would increase national savings and improve the long run performance of the U.S. economy."

To explain some of the differences in findings, the report said that Congressional Budget Office (CBO) projections in the past have "sometimes understated the savings from delivery system reforms and revised payment policies, such as those included in the Senate bill."

For example, actual savings following the Balanced Budget Act of 1997, which changed the way skilled nursing facilities and home health services were reimbursed under Medicare, were 50% greater in 1998 and 113% greater in 1999 than CBO originally forecast. Also, spending on the Medicare Part D prescription drug benefit following the Medicare Modernization Act of 2003 was "about 40% less than CBO forecast."

In addition, the CBO's analysis is "generally limited to the federal budget, and does not attempt to account for savings in the healthcare system more broadly from policies implemented through reform," it stated.

However, recent research published in the New England Journal of Medicine suggests that bundled payments for chronic diseases and elective surgeries could reduce healthcare spending by as much as 5.4% from 2010 to 2019, the report noted. Even if such savings applied to only half of spending in the healthcare sector, the result could be more than $900 billion of savings over the decade.

The council's findings likely will be compared to the report issued on Thursday by the Centers for Medicare and Medicaid Services' chief actuary who noted that national health expenditures under the bill could increase by $234 billion between 2010 and 2019.

Janice Simmons is a senior editor and Washington, DC, correspondent for HealthLeaders Media Online. She can be reached at jsimmons@healthleadersmedia.com.

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