On November 14, 2009, House Republicans released an analysis by CMS’s Office of the Actuary (OACT) that raises questions about the House-approved health reform plan’s potential to control health care spending. The report, which was requested by Ways and Means Ranking Member Dave Camp, found that under H.R. 3962, “America’s Affordable Health Choices Act of 2009”:

• Overall national health expenditures would increase by $289 billion (0.8 percent) for calendar years 2010 through 2019, reflecting the net effect of health service utilization increases and price reductions. OACT projects that the national health expenditure share of gross domestic product would be 21.1 percent in 2019 under the legislation, compared to 20.8 percent under current law.
• Net Medicare spending would be reduced by $571 billion for FYs 2010-2019 (this figure does not include the cost associated with reforming the physician fee schedule formula, which is being considered through separate House legislation). OACT warns, however, that the estimated savings for permanent annual productivity adjustments for Medicare institutional providers such as acute care hospitals, skilled nursing facilities, and home health agencies “may be unrealistic.” Although H.R. 3962’s reductions in Medicare payment updates “would provide a strong incentive for institutional providers to maximize efficiency, it is doubtful that many could improve their own productivity” to the degree envisioned in the legislation. This could result in Medicare payment rates that “grow more slowly than, and in a way that was unrelated to, the providers’ costs of furnishing services to beneficiaries.” Medicare providers thus “could find it difficult to remain profitable and might end their participation in the program (possibly jeopardizing access to care for beneficiaries).” While Congress could monitor this policy to prevent beneficiary access problems, “so doing would likely result in significantly smaller actual savings” than projected.
• Other than reduced inflation updates for Medicare providers, “[m]ost of the provisions of H.R. 3962 that were designed, in part, to reduce the rate of growth in health care costs would have a relatively small savings impact.” For instance, promoting comparative effectiveness research, expanding use of prevention and wellness measures, instituting administrative simplification provisions, and enhancing fraud and abuse enforcement efforts would result in a reduction in non-Medicare federal health care expenditures of $2.1 billion, all of which would result from the comparative effectiveness research proposal.
• There are significant questions about the viability of the proposed Community Living Assistance Services and Supports (CLASS) program — a voluntary national insurance program that would provide cash benefits to assist individuals unable to perform two or more functional activities of daily living to purchase nonmedical services in order to remain in a community setting. According to the report, “voluntary, unsubsidized, and non-underwritten insurance programs such as CLASS face a significant risk of failure as a result of adverse selection by participants.”

OACT is an independent technical advisor to the Administration and Congress. The OACT report includes a disclaimer that the information does not represent an official position of HHS or the Administration.