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National Health Spending

Projections: The Estimated Impact Of Reform Through 2019

ABSTRACT This paper presents updated national health spending projections for 2009–2019 that take into account recent comprehensive health reform legislation and other relevant changes in law and regulations. Relative to our February 2010 projections under prior law,

average annual growth in national health spending over the projection period is estimated to be 0.2 percentage point higher than our previous estimate. The health care share of gross domestic product (GDP) is expected to be 0.3 percentage point higher in 2019. Within these net overall impacts are larger differences for trends in spending and spending growth by payer, attributable to reform’s many major changes to health care coverage and financing. This paper presents an update to the 2009–2019 national health spending projections by payer, which were published in February 2010.1  Our updated projections incorporate the effects of the Patient Protection and Affordable Care Act of 2010 on health spending and coverage, as well as other relevant legislative and regulatory changes.2

Moreover, our paper includes initial estimates reflecting the impact of the Affordable Care Act on government administrative costs as measured in the National Health Expenditure Accounts.  Overview Of Changes In Projected  Spending Total national health spending is estimated to have grown 5.8 percent in 2009 and to have reached $2.5 trillion (Exhibits 1–4). In 2010, spending is expected to grow by 5.1 percent. These growth rates are 0.1 percentage point and 1.2 percentage points faster, respectively, than previously estimated, because of various changes in law and regulations. For 2011, national health spending is projected to grow more slowly, at 4.2 percent (or 1.0 percentage point slower than our prior projections). Physician Payment This pattern of growth is largely attributable to modifications to the Medicare sustainable growth rate system, which determines Medicare payments for physician services. These modifications removed physician- administered drugs from the formula in November 2009 and postponed a 21.3 percent reduction in Medicare physician payment rates set for January 2010. Instead, small increases in Medicare physician payments were enacted in 2010, and provisions of the law were left intact that will result in a 23 percent reduction in payment rates in December 2010.

Premium Subsidies Changes in law related to Consolidated Omnibus Budget Reconciliation Act (COBRA) premium subsidies (to eligible workers who choose to retain employer coverage following job loss) also are anticipated to have affected national health spending. That is, the

extensions in 2009 and 2010 of eligibility for these subsidies, and the length of time that individuals are allowed to receive them, are projected to have led to higher private health insurance enrollment and spending in those years. These subsidies are now scheduled to expire by 2011.

Affordable Care Act Immediate reforms in doi: 10.1377/hlthaff.2010.0788

Charts/graphs  Available from: http://

senweb03.senate.ca.gov/

committee/standing/health/

California_Testimony_of_Jon_

Kingsdale.pdf

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