Health care law may boost spending slightly

WASHINGTON — The health care overhaul law will drive health care spending up only slightly over the next decade, new estimates found.

National health spending will grow a projected 6.3 percent a year through 2019, according to projections economists at the Centers for Medicare and Medicaid Services released today. Before the overhaul law, CMS economists projected that the increase in the spending rate would be 6.1 percent a year.

Public and private health care spending are projected to grow 5 percent this year to $2.6 trillion, up two-tenths of a percentage point from federal estimates made in February, before the Patient Protection and Affordable Care Act of 2010 passed.

That law, which President Barack Obama signed in March, transforms the way health care is delivered and financed. It uses measures such as coverage mandates, expanded government programs and subsidized insurance premiums to increase the number of Americans with health insurance. The law is designed to use taxes, fees and a host of budget-cutting moves to finance the expansion in coverage.

The Congressional Budget Office expects the law to reduce the federal budget deficit by $143 billion by 2019. However, the administrative costs to implement the new law will top $71 billion by that year, according to the new CMS report.

The faster spending growth rate means that health care spending probably will reach $4.6 trillion, or 19.6 percent of the gross domestic product, by 2019, instead of the 19.3 percent projected earlier.

The report found that the new law will provide some notable savings. For example, annual spending growth for Medicare will be an average of 1.4 percent slower each year through 2019, the report found.

This is mainly because of more than 150 cost-cutting measures that the law implements, such as cuts in payments to Medicare managed-care plans long overpaid for their services.

Nancy-Ann DeParle, the director of the White House Office of Health Reform, said in a blog post this morning that the report proves that the new law is cutting costs. She cited the projected per-capita health spending average of $14,720 in 2019 as proof. The earlier estimate was $16,120.

"This is great news for the millions of individuals and families who have struggled with the high cost of coverage," DeParle wrote. "More good news for American consumers: The actuary predicts out-of-pocket spending on health care services per person will decline an average of 6 percent to $1,310, a savings of $80 per person per year."

The bottom line: "It appears that the affordable care act will have a moderate effect on health spending growth rates and the health care share of the economy," said Andrea Sisko, a CMS economist and the lead author of the study on long-term health costs.