CBO Reports Analyze Major Health Insurance Proposals' Potential Effects On Federal Budget, The Uninsured, Costs

Main Category: Health Insurance / Medical Insurance
Also Included In: Medicare / Medicaid / SCHIP
Article Date: 22 Dec 2008 - 3:00 PDT

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Two new reports from the Congressional Budget Office outline "more than a few fiscal challenges for lawmakers hoping to write legislation" to overhaul the U.S. health care system, CQ Today reports. According to CBO, "serious concerns exist about the efficiency of the health care system, but no simple solutions are available to reduce the level or control the growth of health care costs" (Armstrong, CQ Today, 12/18). The report indicates that the number of uninsured will rise to about 54 million in 2019 if no changes are made to the current system (Marcus, Bloomberg/Philadelphia Inquirer, 12/19).

For the reports, CBO analyzed 115 health care proposals and provided cost and savings estimates for each (Edney, CongressDaily, 12/18). CBO did not "endorse any options, but it fleshed out many ideas circulating on Capitol Hill," the New York Times reports (Pear, New York Times, 12/19). One report examined the most important issues in the analysis of major health care proposals, and the other examined the budget implications of various proposals (Armstrong, CQ Today, 12/18). Many health care proposals that President-elect Barack Obama and congressional Democrats have proposed, CBO found, "would carry a high price tag and would generate only modest savings," the Times reports (New York Times, 12/19).

Medicare, Medicaid Proposals
According to CBO, a proposal that would allow U.S. residents ages 62 to 64 to pay to participate in Medicare could reduce the number of uninsured residents by 80,000 and decrease costs by $1.2 billion over 10 years. A proposal that would increase the eligibility age for Medicare to 67 could reduce costs by $85.6 billion over 10 years, CBO found (CQ Today, 12/18).

In addition, according to CBO, a proposal that would require physicians and hospitals to adopt electronic health records and other health care information technology to participate in Medicare could reduce costs by $7 billion in the first five years and by a total of $34 billion over 10 years. The proposal "would also lower health insurance premiums in the private sector," CBO found.

A proposal that would provide physicians who meet certain performance measures with bonuses though Medicare could reduce the "volume and intensity of services provided to their patients" and decrease costs by $5 billion over 10 years, according to CBO. CBO also found that reversing scheduled reductions in Medicare reimbursements to physicians and freezing payments at 2009 levels would cost the federal government $318 billion over 10 years.

A proposal that would allow the federal government to negotiate directly with pharmaceutical companies on prices for medications under the Medicare prescription drug benefit "would produce small if any savings," CBO found. According to CBO, a proposal that would require pharmaceutical companies to provide the federal government with a 15% rebate or discount on brand-name medication covered under the Medicare prescription drug benefit could reduce costs by $110 billion over 10 years. A proposal that would close the "doughnut hole" coverage gap in the Medicare prescription drug benefit would cost more than $130 billion over 10 years, according to CBO (New York Times, 12/19).

In addition, according to CBO, a proposal that would allow residents in families with annual incomes of as much as 300% of the federal poverty level to pay to participate in Medicaid would reduce the number of uninsured residents by 1.1 million and decrease costs by $7.8 billion over 10 years (CQ Today, 12/18).

The cost of Medicare and Medicaid will double from 2009 to 2019 and reach $1.4 trillion without changes to the program, according to the report (Appleby, USA Today, 12/19).

Other Proposals
A proposal that would require employers to offer health insurance to employees or pay a fee to the federal government would raise $47 billion in additional revenue over 10 years, CBO found. The federal government could use the additional revenue to offset the cost of a national high-risk health insurance pool, which would cost $16 billion over 10 years, according to CBO (New York Times, 12/19).

A proposal that would reduce the income and payroll tax exemptions for health benefits would raise $452 billion in additional revenue over 10 years, according to CBO. According to CBO, in the event that the federal government replaced the tax exemptions with tax deductions or subsidies to purchase health insurance, the proposal would raise $552 billion and $606 billion in additional revenue, respectively, over 10 years (CongressDaily, 12/18).

According to CBO, research to determine the cost-effectiveness of medications could reduce costs by $1.3 billion over the next 10 years and decrease total spending on health care by less than one-tenth of 1%. The establishment of a process for FDA approval of generic versions of biotechnology medications could reduce costs by $12 billion over 10 years, CBO found (New York Times, 12/19). A proposal that would increase the federal cigarette tax by $1 per pack could raise $95 billion in additional revenue over 10 years, and a plan that would impose a tax of three cents on each 12-ounce can of nondiet beverages could raise $50 billion in additional revenue, according to CBO (USA Today, 12/19).

Other Conclusions
Health care costs "pose a serious threat" to the economy, CBO said (USA Today, 12/19). With no changes to the current system, health care spending will account for 25% of the gross domestic product in 2025, compared with 16% in 2007, CBO said (New York Times, 12/19).

CBO also said that proposals to expand health insurance to all residents will require "major" changes in access to coverage (Bloomberg/Philadelphia Inquirer, 12/19).

Comments
Robert Laszewski, a health policy consultant and former health insurance industry executive, said, "This report debunks the myth that there are one or two or even five or six things that will fix this" (USA Today, 12/19).

Senate Budget Committee Chair Kent Conrad (D-N.D.) said, "These extensive reports will provide Congress with crucial information and analysis as we undertake health care reform and seek out ways to control health care costs."

AARP Executive Vice President John Rother said, "It's important to remember that CBO estimates costs and savings to the government, not to patients and consumers. We need to balance their hard work with a broader assessment of ways to increase the efficiency and effectiveness of our health system to all parties, not just the government" (CongressDaily, 12/18).

The "Budget Options, Volume 1: Health Care" report is available online.

The "Key Issues in Analyzing Major Health Insurance Proposals" report also is available online.

Reprinted with kind permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation.

© 2008 Advisory Board Company and Kaiser Family Foundation. All rights reserved.

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