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Here We Go Again With the Office of the Actuary

By January 12, 2010Commentary

The Office of the Actuary at CMS has released its analysis of the Senate bill as passed.   (OA Memo) While the OA has often been more skeptical than the CBO on the various reform bills, in this case they find that the Senate bill would result in about 3 million more people having coverage than the CBO estimate.  OA also projects the cost would be about $11 billion than the CBO estimate.   The impact of the bill on total health spending is a .6% increase, down very slightly from the pre-passage version of the legislation.  As before, the OA is very skeptical about Medicare provider payment cuts and trashes the new CLASS program.  The projection that 18 million people would choose to pay penalties rather than buy insurance is also notable.  That is 18 million pretty unhappy people, plus the Medicare Advantage enrollees who will see their benefits reduced and costs go up, plus many persons covered by employer insurance who will likely either lose coverage and have to go to the exchanges or see reduced benefits.  No wonder the implementation date for most of this is 2014.

A separate brief memo from the OA examined the effect of the Senate bill on the Medicare hospital trust fund exhaustion date and on beneficiary Part B coinsurance and premiums.  (Trust Fund Memo) The bill would delay the exhaustion date from 2017 to 2027 and would create growing reductions in both Part B premiums and coinsurance.  The memo cautions, however, that if the savings from Medicare payment reductions are used to protect the Trust Fund, they can’t simultaneously be viewed as paying for the coverage expansions.  The unlikelihood of the provider reductions actually staying in effect over the entire ten year period is also noted.  Even if you assumed those reductions were implemented in full, the reality is that either the Trust Funds will be extended for ten years and we have a much larger deficit due to coverage subsidies or the deficit gets slightly reduced from the Medicare payment cuts but the Trust Fund is out of money by 2017 or earlier.

The OA must be as tired of warning about the likely negative consequences of this “reform” bill as we are tired of writing about their warnings.  If something similar to this bill passes, we will probably be attempting to rectify the problems it causes for a long time.

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