BOX 5-1

2009 Health Care Reform Legislation

As this report went to press, the House of Representatives had passed the Affordable Health Care for America Act, and the Senate had passed the Patient Protection and Affordable Care Act. (For details on the House bill, see Committee for a Responsible Federal Budget, 2009; Congressional Budget Office, 2009d, 2009f. For details on the Senate bill, see Congressional Budget Office, 2009i, 2009j.)

In order to expand access to health care, the proposed health care bills would, among other things:

  • establish an individual mandate for the purchase of health insurance;

  • create “insurance exchanges” through which individuals would be able, within a subsidized and regulated framework, to choose among plans offering differing levels of coverage;

  • impose coverage requirements on larger employers;

  • provide tax credits to certain small employers who offer health insurance; and

  • expand eligibility for Medicaid.

Under the two bills, 94-96 percent of the nonelderly U.S. population (who are legal residents) would have insurance coverage by 2019—an increase in the number of insured people of 31-36 million (Congressional Budget Office, 2009d, 2009j).

The Congressional Budget Office (2009d, 2009i) projects that the proposed expansions in insurance coverage would increase net costs by $614-$891 billion over the next 10 years. That increase would be offset by increases in federal revenues of $264-$574 billion and a combination of spending changes that would save $427-$483 billion: the result would be a net reduction in federal deficits of $109-$132 billion. The largest savings would come from changes in the Medicare Advantage payment rates ($118-$170 billion) and reductions in annual updates to Medicare payment rates for most services in the fee-for-service sector other than physicians’ services ($186-$228 billion).

One or both bills include a number of other measures designed to slow the growth of systemwide health care costs: payment reforms to discourage unnecessary hospital readmissions; pilot programs to help hospitals and physicians better manage and coordinate care (through “accountable care organizations”) and deliver more cost-efficient care (through payment “bundling”); increased payments to primary care providers and the promotion of medical homes designed to coordinate care; funding of new comparative effectiveness research and the development of new quality measures; measures to encourage greater price transparency; and measures to promote preventive services and wellness programs (Committee for a Responsible Federal Budget, 2009:5). According to an analysis that relies heavily on the Congressional Budget Office, the 10-year savings associated with these measures in the House bill are quite modest—in the neighborhood of $5 billion (Committee for a Responsible Federal Budget, 2009:5).

In the second decade, the Congressional Budget Office (2009f, 2009i) expects the spending and revenue provisions of the House and Senate bills to slightly reduce federal budget deficits (relative to those projected under current law), by between zero and 0.5 percent of GDP. The effects of the spending provisions alone would be even more modest.

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