Will Obama's healthcare reform plan cut costs?

Here's a rundown of key elements of the Obama plan, or the December Senate plan on which it's heavily based, and the financial impact. Note that any cost estimates come with what forecasters acknowledge is a very large degree of uncertainty.

Insurance 'exchange'

Individuals who don't have employer-based coverage or Medicaid would shop for insurance through an exchange, where providers complied with basic coverage standards.

"The exchanges could grow into a very powerful mechanism for cost control," Mr. Aaron says.

It's an idea with some appeal for both conservatives (through its potential for consumer choice and competition among insurers) and liberals (through regulations, such as preventing insurers from dropping coverage).

The Congressional Budget Office has estimated that individuals would see premiums for a given amount of coverage go down by as much as 10 percent due to the reforms. But the CBO added that many people would end up paying more for insurance anyway because they'll buy a greater amount of insurance coverage.

Overall, the reform elements designed to expand insurance coverage would cost the government an extra $181 billion in 2019, to use one year when the reforms are fully in effect, according to an estimate by Richard Foster, chief actuary for the government's Center for Medicare and Medicaid Services. The report estimates that 22 million Americans would be uninsured in that year, 34 million fewer than without the reforms.

A key idea behind the mandate on individuals is to see that, as insurers face a new requirement to offer coverage without regard to consumers' preexisting health conditions, people don't wait until they're sick to buy coverage. But Obama would offer a "hardship" exemption if insurance would cost more than 8 percent of one's annual income.

Employer-based coverage

The CBO estimated that reforms wouldn't push private-sector insurance premiums up or down much for people in large- or small-group plans.

One big uncertainty is how many employers would drop coverage (and pay a $2,000-per-worker fine if they have 50 or more employees).

Some government estimates of the reform's impact envision relatively few employers doing this. The more that do, the higher the government's health tab will go, because more people will qualify for subsidies as they shop for individual insurance.

Meanwhile, a tax on the highest-end private health plans is part of Obama's plan for keeping the reforms "deficit-neutral" for the federal budget.

Medicare

Obama seeks to trim some $540 billion from the growth of Medicare spending over the first decade of his reforms. The main way: slowing the growth of payment rates to hospitals.

Health policy experts say this may not be hard at the beginning, but will get more difficult over time. Some doctors could end up backing out of the Medicare program, for example.

Joseph Antos, a healthcare expert at the conservative American Enterprise Institute, also worries that a key reform provision – setting up an independent board to curb Medicare costs – is too weak to be effective.

"It's in the nature of politicians to want to give people things and not take them away," he says.

Medicaid

The plan would expand Medicaid coverage to people with incomes at 133 percent of the official poverty level. About 19 million more Americans would be insured because of this in 2019, estimates Mr. Foster, the Medicare/Medicaid actuary.

As a result, spending on Medicaid would be an estimated $86 billion higher in that year – a figure that's part of the total $181 billion (cited above) in government spending on expanded coverage.

Long-term care

The reforms include a so-called CLASS Act, which would set up a voluntary insurance program to cover assisted-living costs. During the next decade, the program would be a modest revenue-raiser for the government, because of a five-year period before people can start collecting benefits.

But Foster, among others, warns of "a very serious risk that the program would become unsustainable," because the several million people who sign up would be those most likely to draw benefits.

Previous

1 | 2