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CBO: No great savings from health reform

July 18, 2011

Don’t expect the health reform law to tame health care costs. That’s the conclusion of the director of the Congressional Budget Office, who also suggested some of the simplest ways to moderate costs would be to roll back some of its key provisions.

In a July 12 speech, Douglas Elmendorf previewed a forthcoming CBO report that studied two dozen demonstration projects aimed at reducing health care spending. And all of them have showed disappointing results, Elmendorf said, according to reports on his speech by the Financial Times and Congressional Quarterly.

“It turns out to be pretty hard to take ideas that seem to work in certain contexts and proliferate that throughout the health care system. The results are discouraging," Elmendorf said, according to Financial Times.

Among those demonstration projects were accountable care organizations, medical homes and bundled payments—all things now being expanded by the federal Medicare agency with the authority of the 2010 health reform law.

But CBO has concluded that those programs can only save a few billion dollars over the next decade. And that led Elmendorf to list—though not recommend—other actions that could mitigate federal costs over that time.

At the top of his list? Undo key parts of the health reform law.

The Patient Protection and Affordable Care Act mandates that all states expand Medicaid eligibility for all adults making as much as 133 percent of the federal poverty limit. CBO projects the expansion will add 16 million more Americans to the Medicaid rolls—with the federal government picking up the lion’s share of the tab initially.

In Indiana, adults making 25 percent or less than the federal poverty limit—which is currently $22,350 for a family of four—currently qualify for Medicaid coverage. The Medicaid expansion is expected to add more than 500,000 Hoosiers to the program.

In addition, the health reform law raises various taxes to pay for subsidies to help individuals and small-business workers afford coverage in newly created online exchanges. These subsidies are projected to average about $5,000 per family of four, according to CBO projections.

The exchanges are expected to cover 24 million Americans, including more than 1 million Hoosiers. Subsidies will be available for anyone with household income of less than 4 times the federal poverty limit, or $89,400 for a family of four.

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