The health care law will save Medicare $120 billion during the coming five years as a result of lower payments to insurers and hospitals, Medicare announced today. Companies leading the market in Medicare Advantage enrollees, such as Humana Inc., UnitedHealth Group Inc., and WellPoint Inc., will receive reduced payments with a saving of approximately $50 billion.

The Obama administration says other steps to reduce fraud and abuse are also providing promising results.

Medicare Deputy Administrator, Jonathan Blum stressed that the health care overhaul really is working, resulting in real savings. He added that the program is becoming more efficient. Payment reforms are improving quality, performance and bringing down costs.

When President Barak Obama signed the health care bill into law last year, its major goal was to cut spending on Medicare. The Congressional Budget Office estimates the savings will reduce the US deficits by $143 billion.

Hospitals, medical equipment providers of such goods as wheelchairs and oxygen will also receive lower payments.

Blum added that the savings were no surprise to him. They were more or less what he had expected.

The five-year $120 billion estimated savings (through 2015) were broken down by Medicare as follows:

  • Reforms of health care delivery systems – $55 billion
  • Rewarding quality of care – reforming provider payments – $55 billion
  • Patient safety improvements – reducing hospital readmissions and hospital acquired conditions – $10 billion
  • Reducing Medicare fraud and abuse – $1.8 billion
  • Getting value for money for durable medical equipment – $2.9 billion
  • Lowering payments to insurance companies – $50 billion

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Written by Christian Nordqvist