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U.S. healthcare costs projected to continue to climb

By covering more Americans under the healthcare overhaul, costs will increase over the next decade, but not substantially more than if the law had not been enacted, an independent government analysis finds.

September 09, 2010|By Noam N. Levey, Tribune Washington Bureau

Reporting from Washington —

Pushed by a dramatic increase in the number of Americans who will get insurance under the new healthcare law, total U.S. medical spending will continue to gallop upward, consuming nearly 20% of the economy by 2019, according to a new government estimate.

But because new savings in the law offset most of the cost of extending insurance to more people, the nation's total healthcare bill is not expected to be substantially larger than it would have been without the overhaul.

"It appears that the Affordable Care Act will have a moderate effect on health spending growth," said Andrea M. Sisko, the lead author of the closely watched study by independent economists at the Centers for Medicare and Medicaid Services.

The estimates, which parallel earlier analyses of the law, underline a major promise of the landmark legislation that President Obama signed in March.

By 2019, nearly 93% of the population is projected to have medical coverage, compared with about 84% now. Without the law, the percentage of people with coverage was expected to dip to 83% over the next decade, according to the report.

Extending coverage to an estimated 32.5 million uninsured Americans is expected to reduce the tendency of doctors, hospitals and others to shift the cost of treating the uninsured onto those who have insurance.

But the expansion of coverage will not come without a cost.

"When you cover the uninsured and they get the care they need, you have to spend more money," said Karen Davis, president of the nonpartisan Commonwealth Fund, a leading authority on healthcare policy.

The report estimated that healthcare spending will nearly double for the previously uninsured as many of the newly insured get care they now do without.

The coverage expansion is largely paid for with a series of new fees and taxes and cuts in what Medicare pays private health insurers, hospitals and other providers.

Before passage of the law, the United States was projected to spend $4.5 trillion on healthcare in 2019, up from about $2.6 trillion this year.

The overhaul is expected to push up the nation's 2019 healthcare bill to $4.6 trillion.

That translates to an average annual growth rate of 6.3% over the next decade, far outpacing the economy-wide inflation rate.

The continuing upward surge in total healthcare spending poses a challenge for Obama and others who championed the healthcare overhaul as a way to "bend the cost curve."

Republican critics of the new law, many of whom are promising to repeal it, have seized on earlier estimates of rising healthcare spending to cast the overhaul as a failure.

On an individual level, millions of Americans are still seeing their healthcare bills rise as insurance companies demand higher rates and employers pass along a growing share of their healthcare costs to workers.

The overhaul includes numerous provisions designed to relieve this cost pressure on consumers, including those to improve the quality of medical care and make the healthcare system more efficient.

"The new law … supports a major set of research and development for new models of healthcare delivery and healthcare payment," said Richard S. Foster, the chief actuary at the Centers for Medicare and Medicaid Services, whose office prepared the report.

But because many of these changes are relatively untested, Foster acknowledged that his team could not estimate their impact.

Other analysts, including Davis at the Commonwealth Fund, have estimated that the changes, including incentives to get doctors and other medical providers to work together more effectively, could ultimately save hundreds of billions of dollars.

noam.levey@latimes.com

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