July 28,2011

Press Contact:

Julia Lawless, Antonia Ferrier, 202.224.4515

Fact Sheet: The Impact of the New Health Law on the Nation’s Health Care Spending

Prepared by the Senate Finance Committee Republican Staff

Summary: The following highlights are based on the projections of national health care spending through 2020 done by the Centers for Medicare and Medicaid Services (CMS) Office of the Actuary personnel and include the impact of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) and the Health Care and Education Reconciliation Act (HCERA) (P.L. 111-152).
Bigger Entitlement Programs and More Health Care Spending.  

♦ One in five dollars of the American economy will be spent on health care: “the health share of the gross domestic product is projected to increase from 17.6 percent in 2009 to 19.8 percent by 2020.” 
♦ Significantly increases health care spending:  The implementation of PPACA in 2014 is “anticipated to contribute to a significant acceleration in the national health spending growth rate in 2014 (8.3 percent, compared to 5.5 percent in 2013).”
♦ Doubles the size of government health care entitlements:  The government spent $1.2 trillion on health care in 2010 ($525 billion for Medicare and $400.7 billion for Medicaid), but that will nearly double to $2.3 trillion by 2020.
♦ Increases health care spending across the board:  “For the three largest sectors (hospital services, physician and clinical services, and prescription drugs), total spending is projected to be higher when the major expansions of this law are implemented in 2014.”

Higher Health Care Premiums for American Families and Loss of Current Coverage. 
♦ Higher premiums: “In 2014, growth in private health insurance premiums is expected to accelerate to 9.4 percent, 4.4 percentage points higher than in the absence of health reform…”
♦ Lost benefits: “…some large employers with low-wage employees are expected to discontinue offering health insurance to their workers…”

Largest Expansion of the Medicaid Program EVER.
♦ Medicaid will grow by one-third:  “In 2014, Medicaid spending is projected to increase substantially (20.3 percent) as a result of the expansion in Medicaid eligibility under the Affordable Care Act. Enrollment (75.6 million) is projected to be about one-third higher than in 2013.”
♦ One in five health dollars to be spent on Medicaid: “By 2020, Medicaid is projected to account for nearly 20 percent of national health spending (from 15 percent in 2009).”

The FACTS Behind the 2010 “Historic Low” Growth of 3.9 Percent – It’s the Recession, Stupid!

♦ Lower spending in 2010 was the result of the recession:  Lower spending “reflect[ed] the impact of the recent recession and a continued decline in service use.”
     o “Moreover, out-of-pocket spending climbed just 1.8 percent (after 0.4 percent growth in  2009) as many people continued to restrain their use of health care goods and services.”
     o “This trend is driven by recession-related declines in physician visits, as many consumers  delayed health care to reduce expenses, and in part, by a less severe flu season than in the previous year, 2009.”

♦ Increased cost-shifting to taxpayers:  “The effects of the recession, as well as increased federal matching rates to states for Medicaid, are estimated to have influenced the shift of health care financing toward the federal government.”
♦ Health care costs will quickly sky-rocket: “For the period 2011–13, national health spending is projected to increase more rapidly than the preceding two years…”
♦ More health care spending across the board:  Increased prescription drug spending by 10.7 percent in 2014 (5.1 percent higher than without PPACA); increased physician and clinical services by 8.9 percent in 2014 (3.1 percent higher than without PPACA); and increased hospital spending by 7.2 percent in 2014 (1.0 percent higher than without PPACA).