Senate Democrats received some good news/bad news from two new studies issued by the Centers for Medicare and Medicaid Services (CMS) on the "Patient Protection and Affordable Care Act" passed by the Senate on Dec. 24.
First, a Jan. 8 memo from CMS Chief Actuary Richard Foster finds that an additional 34 million people would be covered by 2019 from proposed reforms in the Senate healthcare reform bill—up from the 31 million projected last month by the Congressional Budget Office (CBO). This increase is related to the net effect of several shifts, he said.
In particular, 18 million people would be able to obtain primary Medicaid coverage—at a cost of $882 billion (or just $11 billion more than the CBO projection)—through the expansion of eligibility to all legal adult residents under 133% of the federal poverty level. In addition, roughly 2 million individuals with employer-sponsored insurance would enroll in Medicaid for supplemental coverage.
Also, another 21 million individuals—most of who are currently uninsured—would receive individual insurance coverage through newly created exchanges. A majority of these individuals would qualify for premium and cost-sharing subsidies. At the same time, those individuals with employer-sponsored health insurance would decline by 4 million overall —reflecting both gains and losses under the Senate legislation.
In the other Jan. 8 memo, from Solomon Mussey, director of CMS' Medicare and Medicaid Costs Estimate Group, he said the net savings to Medicare Part A (hospital) trust fund would mean a longer life for the fund—from 2017 to 2027. This is the result of combination of lower Part A or hospital costs and higher tax revenues.
Approximately, 67% of those individuals who are eligible to purchase coverage through the new insurance exchanges will do so because they do not have access to affordable plans from their employers, Foster noted in his CMS memo. Among those who decide to remain uninsured, many will conclude that the penalties the legislation would impose for not carrying insurance were not "sufficiently large" to have an impact on their coverage decision. Those fees would climb to $750 per year for individuals by 2016 as proposed under the Senate bill.
Also, similar to the memo Foster issued last month on the Senate bill, he noted that a sustained reduction in payment updates could cause Medicare payment rates to grow more slowly than providers' costs of providing beneficiary services. Simulations by the Office of the Actuary suggest that hospitals and other Part A providers could become unprofitable within a 10-year projection period.
The new long term care insurance program in the bill, known as the Community Living Assistance Services and Supports (CLASS), which is included in the Senate bill, would create a net savings of $38 billion over the first 10 years. However, the program, which is voluntary, could create expenditures over the long-term that would exceed premium receipts. Adverse selection in the long run could end up making the program unsustainable, Foster said.
White House Council of Economic Advisers head Christina Romer, speaking Sunday on ABC's "This Week," sided with the report's findings on costs. "We feel very confident that...the Senate version of the bill would genuinely slow the growth of costs over the long run by about 1 percentage point a year, which may sound small, but it's actually enormous."