PPACA: Money Talk

Elmendorf noted that one assumption CBO baseline forecasts is that Congress will find an ability it has lacked in the past to make sharp reductions in Medicare payment rates for physicians' services stick.

By about 2036, spending on Social Security and major federal health programs — Medicare, Medicaid, the Children's Health Insurance Program, and the new PPACA health insurance subsidies to be provided through the new PPACA insurance exchanges — will increase to about 16% of U.S. gross domestic product (GDP), from 10% this year, Elmendorf said.

"To prevent debt from becoming unsupportable, policymakers will have to substantially restrain the growth of spending, raise revenues significantly above their historical share of GDP, or pursue some combination of those two approaches," Elmendorf said.

BEN BERNANKE

Bernanke started off a House Budget Committee hearing on the economy held Wednesday by giving an overview similar to a talk he gave last to members of the National Press Club.

Bernanke told lawmakers that the aging of the population and increases in health care costs could lead to increasingly large budget deficits, unless Congress enacts significant program changes.

Rep. Debbie Wasserman Schultz, D-Fla., asked whether cost control, wellness and care coordination provisions in PPACA could help bring about the required changes.

Given the magnitude of health care costs, "finding anything you can do to reduce health care spending would be very, very helpful," Bernanke said.

But Bernanke declined to try to estimate what the effect of the Affordable Care Act on costs might be. "I'm not really able

to make estimates," he said of the measures. "I don't know how effective they're going to be."

The effectiveness of cost reduction measures is something Congress should monitor closely, Bernanke said

RICHARD FOSTER

Richard Foster made headlines while debate on the bills that became PPACA was under way, by suggesting that the Community Living Assistance Services and Support (CLASS) voluntary worksite long term care benefits program included in the bills appeared to be actuarially unsound

Foster talked about the need for realism in health care program cost projections in a House Budget Committee hearing held Jan. 26.

PPACA could reduce the number of uninsured people in the United States by 34 million by 2019, and it could generate about $577 billion in health program savings and revenue, but the coverage expansion provisions will cost about $828 billion through 2019, Foster said.

Foster said some of the most important PPACA Medicare expenditure and revenue provisions seem likely to be the cut in Medicare provider payment levels, which could save $233 billion, and $145 billion in savings from reducing Medicare Advantage payment benchmarks and permanently extending coding intensity adjustment authority.

A move to increase the health insurance payroll tax by 0.9 percentage points for individuals with earnings above $200,000 and families with earnings above $250,000 could raise $63 billion, Foster said.

PPACA also autorizes a program for developing new health delivery systems and payment methods, such as accountable care organizations. "This program has significant potential for improvements in the quality and cost efficiency of health care, but its effects on Medicare expenditures cannot be assessed until specific plans have been developed and tested," Foster said.

One particularly unrealistic provision in PPACA requires permanent annual Medicare productivity adjustments to price updates for providers such as hospitals, skilled nursing facilities, and home health agencies.

Health care providers do not seem to have much control over factors such as wages, and, over time, a sustained reduction in payment updates could make many providers unprofitable, Foster said.

Simulations show the provision could make about 15% of Medicare inpatient facilities unprofitable within 10 years, Foster said.

THE FUTURE

The House Ways and Means Committee is certain to talk about the effects of PPACA at a hearing on the 2012 U.S. Department of Health and Human Services (HHS) budget proposal now scheduled for 10 a.m. Feb. 16. The witness will be HHS Secretary Kathleen Sebelius.

Talk about PPACA also could surface when the Ways and Means Committee brings in U.S. Treasury Secretary Tmothy Geithner to talk generally about the Obama administration's 2012 budget proposal Feb. 15 and when the committee brings in Jacob Lew, the director of the Office of Management and Budget, at 2 p.m. Feb. 16.