A week ago I ran into a long-time Republican health policy expert who was very excited about the Memorandum the CMS Chief Actuary had released on April 22nd about the financial effects of the Patient Protection and Affordable Care Act (PPACA). He was very excited because he believes that the Memo has significant information that will support repeal of the new health reform law when the Republicans take over one or both houses of Congress next year. (FYI – Current credible speculation puts the House as a toss up for Republican control in 2011, but the Senate is less likely to switch party control.)
Having reviewed the Actuary’s report I don’t think it has dramatically new information, or orbit altering analyses. However, it does provide some insights into the new health reform law and how the political discourse about it may play out over the coming months – and possibly years.
First, Rick Foster, the Chief Actuary at CMS, is very clear about the difficulties and uncertainties of estimating the impact of the new law. He specifically states at the end of the Summary:
“The actual future impacts of the PPACA on health expenditures, insured status, individual decisions, and employer behavior are very uncertain. The legislation would result in numerous changes in the way health care insurance is provided and paid for in the U.S., and the scope and magnitude of these changes are such that few precedents exist for use in estimation. Consequently, the estimates presented here are subject to a substantially greater degree of uncertainty than is usually the case with more routine health care legislation.” [emphasis added]
And the “Caveats and Limitations of Estimates” section of the memo includes 11 bullet points, one of which states: “Due to very substantial challenges inherent in modeling nation health reform legislation, our estimates will vary from other experts and agencies. Differences in results from one estimating entity to another may tend to cause confusion among policy makers. [emphasis added] These differences, however, provide a useful reminder that all such estimates are uncertain and that actual future impacts could differ significantly from the estimates of any given organization. Indeed, the future costs and coverage effects could lie outside of the range of estimates provided by the various estimators.”
This second paragraph directly addresses how the CMS Actuary’s April report differs from the Congressional Budget Office (CBO) March estimates. Without going into technical details, there are two important things to note in comparing the two analyses. First, CBO estimates focus on Federal spending, while the CMS Actuary looks at national health expenditures. Both are important, valid, and useful, but different. And second, looking at insurance coverage, the CMS Actuary found that the PPACA would be more effective at reducing the number of people without insurance and in getting people covered under Medicaid, while causing less disruption of employer sponsored benefits. Specifically, compared to the CBO’s analysis the Actuary concluded that in the year 2019:
- More people would get insurance (33.8 million v. 32 million according to CBO – although their baseline numbers also differ so they both estimate that there will be ~23 million people without insurance in 2019);
- Employer provided health benefits would decrease by 1.4 million people v. 3 million according to CBO’s estimates;
- Medicaid enrollment would increase by 20.4 million v.16 million in CBO’s assessment;
- The number of the people in getting their insurance through the new Insurance Exchanges would be 31.6 million v. 24 million according to CBO’s estimates.
So overall, it could be concluded that the CMS Actuary estimates that the new law would be slightly more effective in improving coverage than what CBO had estimated.
Outlook for Individual Costs and Cost Control Still Cloudy
Unfortunately, what neither of the analyses provide are estimates of how much actual insurance premiums will increase over the next 10 years. Lack of control over spending growth is a generally agreed upon weakness in the new law, and the almost certain increase in insurance premiums and overall health spending will at the core of potent political arguments about the new law and how it should be modified, built upon and/or repealed.
Political Battling With Numbers
Reports – like those from the CMS Actuary and CBO – will provide nuggets of numerical information that will be turned into sound bites flung in the political-rhetorical skirmishes that will play out in the coming months – and probably years.
Updates to this “numbers game” will fuel future political firestorm since they will almost certainly contain higher cost estimates than the recent ones from CBO and the Actuary because they will be shifting the 10 year cost window from 2010-19 to 2011-20. That is, replacing 2010 – when very little of the new law was in effect – with 2020 – when all the provisions are scheduled to be implemented – will dramatically raise the dollar estimates, possibly in the $100 billion range. While comparing the 2010-19 years with the 2011-20 years is certainly an apples-to-oranges comparison, for political sound-bite purposes it is like hitting a baseball off a batting T – just because it isn’t relevant to the actual (policy or healthcare reform) game, doesn’t matter if it leads to a huge (political) hit.
What does this all mean? It means that health reform will continue to be a huge political hot potato, and different groups will claim it is fried, baked, scalloped, au gratin, from Idaho, Maine, California, etc….. Basically whatever suits the group’s political purpose at the time, because within all the reports and numbers and variables in implementation, there will be quantitative and qualitative data, (of good and other quality), to justify their positions and sound bites.
To counteract the inevitable political rhetoric, government agencies ranging from HHS, Treasury, and in every State will need to be rapidly and effectively implementing the many provisions of the new law. Right now, many people are scrambling as the marathon of health reform legislation has turned into the sprint (without end in sight) of implementation. As the CMS Actuary has described, the actual results of the implementation of the new law could be very different from even the best estimates. It is the goal of the legions of people inside government agencies and within private companies to try and make the results as good as possible, i.e. the most people covered with health insurance, at the lowest cost, with the highest quality.
At the same time, there will certainly be problems encountered along the way. And it will be the responsibly of Congress to be vigilant in listening to government officials and people in the private sector about these real-world problems, so they can modify the law and redirect resources to address these problems and maximize the value of the new law. At least that’s the way it’s supposed to work. Whether politics gets in the way, and maneuvering for control of Congress, positioning for 2012 elections, or strategizing for market share complicates this process remains to be seen.
Hang On Tight
Implementing health reform, even for those driving the process, may be more like trying to steer a rocket sled than a 737. So, as I’ve said before, hang on and make sure your seat belt is tightly fastened.