Baucus Bill Does Not Bend the Cost Curve

A Lewin Group study commissioned by the Peter G. Peterson Foundation, finds that although the Baucus health care bill (the legislation that recently passed the Senate Finance Committee) is often touted as the most fiscally responsible of all of Congress’s reform plans, it “relies on certain cost containment approaches that have not worked in the past” and therefore “does not bend the total health care cost curve downward.”

Rather than fundamentally realigning incentives in the health sector to lower the overall cost of care, the Baucus bill imposes top down cuts in payments to medical providers which will only serve to shift costs around the current system. Here are some of the other key findings from the Lewin study on the America’s Healthy Future Act of 2009 (S.1796):

• Adds to the Deficit. The bill would add to the federal deficit in the first ten years and beyond if it included a permanent “doc fix” to prevent cuts in Medicare payments to physicians under the Sustainable Growth Rate instead of only a one year temporary fix. Every year, Congress defers these reductions in pay to doctors but the bill creates false savings by pretending that Congress would suddenly let these cuts occur. More than $404 billion in savings over the first ten years are attributable to these savings– and reductions in uncompensated care funds for hospitals that treat the uninsured (DSH payments)– that are unlikely to fully materialize.
• Increases Total Health Spending. Under the bill, total spending in health care would rise from 17 percent of GDP in 2010 to 25 percent in 2029. Spending by the federal government would rise by $400 billion over the next ten years and $1.6 trillion over the next twenty years.
• Covers less than half the uninsured. Although the Baucus bill includes a an individual mandate, a personal requirement, to purchase insurance it would fall far short of universal coverage, only reducing the number of people who lack health insurance by 49 percent.
• Adds Costs and Delivers Little Savings to Consumers. In the first ten years, the bill would increase consumer spending in the aggregate by 3 percent, or $254 million. After twenty years, consumer spending would increase by 6.4 percent, or roughly $1 trillion. Despite President Obama’s promise that the typical family would see $2,500 in savings under health reform, the Baucus bill would provide the vast majority of Americans who already have insurance an average of $8 in savings.
• Increases Employer Spending. After 2016, employer spending on health care would increase steadily compared to current law due to the various fees and excise taxes included in the bill. As a result of rising costs and expansions in public coverage, 16 million people could lose their current employer-sponsored insurance as workers are dumped onto Medicaid or into an exchange to receive a public subsidy at the expense of federal taxpayers.

Click here to read the full Lewin report.

Co-authored by Kathryn Nix.