PPACA: A Detailed Drilldown into Costs of Recent Healthcare Reform Is Key
as it May Increase Budget Deficit...
e Congressional Budget Office expects Reform to /ower the deficit by $143 billion during 2010-19 - Gross cost of $938 billion for expanded coverage, per CBO. - Less: $511 billion in spending cuts from lower Medicare reimbursement rate + $420 billion in tax revenues (excl. excise tax) from higher payroll tax rates on high-income families and indoor tanning services + $149 billion in penalty payments by
employers/individuals and excise tax on “Cadillac” insurance plans with annual cost exceeding $10,000 for individual / $28,000 for families.
KP Source: CBO. (@)E) www.kpcb.com USA Inc. | Income Statement Drilldown 115
PPACA —
Verdict Is Still Out on Eventual Costs / Deficit Impact
e Issues With Official Cost Estimates to Consider - Deficit neutral status somewhat reliant on future lawmakers’ willingness to implement Medicare savings/reimbursement reductions:
e Reductions in payment rates for many types of Healthcare providers relative to the rates that would have been paid under prior law (always a politically difficult decision).
e However the good news is that recommendations from the Independent Payment Advisory Board focused on reducing growth in per capita Medicare spending if it exceeds target automatically become the law without congressional intervention if Congress allows IPAB to operate as planned.
- CBO estimates the effects of proposals as written: CBO acknowledges that it is unclear whether reform can actually reduce the annual growth rate in Medicare spending from 4% (historical average) to 2% for the next two decades, as PPACA estimates assume.
- Relies on excise taxes on sectors of the healthcare industry that could be passed through to consumers via price increases.
- Starting in 2018, assumes taxation of high premium employment-based health insurance plans.
e Opportunities For Cost Savings to Consider - Increased access to preventative care could potentially slow down overall healthcare cost growth. Such potential effect is not captured in CBO scoring.
- Investments in information technology and new provider & consumer incentives can drive better and more efficient care.
KP Source: Morgan Stanley Healthcare Research. a USA Inc. | Income Statement Drilldown 116
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