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Critical Condition

NRO’s health-care blog.

Where’s the Administration’s Cost Estimate?



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The chief actuary for Medicare has released a memorandum providing cost estimates for the final health legislation passed by Congress and signed by the president.

Amazingly, the HHS secretary tried to suggest that the memo confirms that the legislation will produce the favorable results that the legislation’s backers have touted for months.

That’s nothing but spin. In truth, the memo is another devastating indictment of the bill. It contradicts several key assertions by made by the bill’s proponents, including the president.

For starters, the actuary says that the legislation will increase health care costs, not reduce them – by about $300 billion over a decade. Yes, that’s over a very large base of spending (more than $35 trillion). But the president and his team have talked incessantly of painlessly cutting $700 billion or more of wasteful spending. Nothing in the bill comes close to making that happen. Overall health spending will continue to rise very rapidly after the bill is implemented.

The actuary also says that the financial incentives in the bill will lead many employers to stop offering coverage altogether. That means about 14 million people with job-based insurance today will lose it. Moreover, he estimates that the cuts in Medicare Advantage will reduce enrollment by 7 million people. So much for keeping the Democrats’ other mantra of “keeping the coverage you have today.”

The memo says the Medicare cuts will total nearly $600 billion through 2019, and that they will almost certainly jeopardize access to care for seniors by driving scores of institutions into financial distress.

Employers will pay taxes totaling $87 billion over a decade for not offering qualified coverage, and individuals who don’t sign up with approved insurance will pay another $33 billion in fines over the same period.

The various taxes and fees on insurers and producers of drugs and devices will largely get passed on to consumers, says the memo. In other words, these taxes will hit the middle class hard and drive their premiums up, not down.

The actuary says the new long-term care insurance program created in the bill faces “a significant risk of failure” due to adverse selection – meaning that the program will attract the kind of enrollment that will require higher costs than can be covered by the premiums collected. That, however, did not stop the Democrats from double-counting the program’s $70 billion in premiums as an offset for the massive health entitlement program. So not only did the bill use a budget gimmick to hide the costs of the health expansion, it also set taxpayers up for another bailout when the long-term care program runs aground.

By longstanding practice, the administration uses the health care cost estimates produced by the chief actuary when putting together the president’s annual budget submission in February and an update in mid-summer.

But the estimates that the actuary has produced for the health bill so clearly contradict what the president has said the bill will do that the administration is in an awkward position, to say the least. So awkward in fact that the administration has stamped every memo put out by the actuary during the entire health debate with this disclaimer: “The statements, estimates, and other information provided in this memorandum are those of the Office of the Actuary and do not represent an official position of the Department of Health and Human Services or the Administration.”

Which raises the question: If the actuary isn’t producing the administration’s health care cost projections, who is?



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