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A Dark Picture of America Without Health Reform

SOURCE: AP/Haraz N. Ghanbari

Cleveland Clinic exercise physiologist Audra DiRauso sets up an exercise bike for Anthony Rugare during a cardiac rehabilitation class on December 21, 2009, in Cleveland. Medicare and Medicaid—like private coverage sources—are buffeted by the larger health care market, including the demand for services and the changes in technologies, prices, and utilization patterns.

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The Congressional Budget Office issued a helpful reminder yesterday of why comprehensive health care reform is so important to our nation’s future. And it couldn’t come at a better time as policymakers in Congress and the Obama administration consider how to move forward with reform in the wake of last week’s special election in Massachusetts. The CBO’s annual budget and economic forecast predicts major economic trends for the next 10 years and gives us an early viewing of the American economy without health reform. It’s not a flattering portrait.

CBO’s analysis isn’t a finely detailed rendering of health policy issues. But it does paint a picture of the dynamics driving the federal budget—particularly growth in federal health care spending. Most importantly, CBO projects that the major public health insurance programs, Medicare and Medicaid, will grow an average of 7 percent and 6 percent per year, respectively. This growth would exceed economic growth, inflation, and growth of the federal budget. The growth of these programs—if unconstrained by reforms in health care delivery and payment—will crowd out other priorities from the budget.

Medicare and Medicaid—like private coverage sources—are buffeted by the larger health care market, including the demand for services and the changes in technologies, prices, and utilization patterns. These programs pay for approximately 40 percent of total health care spending. But spending in private as well as public programs is driven by excessive use of high-cost, high-technology services, regardless of their value. Public and private spending will continue to rise without payment reform initiatives and other efficiencies.

Comprehensive health reform—which addresses cost as well as coverage—changes these dynamics. It encourages providers to deliver high-quality, rather than high-volume, care; improves access to primary care; and expands the availability of tools such as health information technology and research on which treatments work and which do not. The underlying trends in our health care system will not change without these reforms. And Medicare and Medicaid will continue to absorb an ever-growing share of our nation’s economy and the federal budget.

This spending growth has consequences that extend beyond the federal budget. Many people with Medicare coverage, for example, will pay significantly higher premiums for their health insurance. States will struggle to balance their budgets while funding the Medicaid program. And the Medicare trust fund will lurch closer to complete exhaustion, throwing Medicare’s long-term future into greater uncertainty.

Of course, Medicare and Medicaid’s future spending is only one aspect of the larger sketch of the status quo. As analysts at the Urban Institute have noted, failing to reform our health care system would have striking costs. Many employers would see their health premiums more than double, thus limiting their ability to provide coverage and add workers. Families would face out-of-pocket costs that grow by 35 percent or more. Half of the states would see Medicaid and Children’s Health Insurance Program spending more than double. And the ranks of Americans without health insurance would swell to more than 65 million. Clearly, the portrait of the American economy without health reform would be rendered in dark, threatening tones.

Is this really the picture we want to paint?

Karen Davenport is the Director of Health Policy at American Progress

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