Health Care Update: Reform Policies of America’s Affordable Health Choices Act Are Deficit Neutral

For Immediate Release:

July 18, 2009

Contact:Katie Grant
Stephanie Lundberg
(202) 225 - 3130

Reforming America’s health insurance system to contain costs, expand patient choice, and provide all Americans with the peace of mind of guaranteed access to affordable, quality health care is a top priority for the Democratic Congress. From the outset, President Obama and the Democratic Congressional Leadership have committed to passing fiscally responsible health reform that accomplishes our reform goals without adding to the federal deficit.
 
On Tuesday, the America’s Affordable Health Choices Act was introduced in the House of Representatives. Markups began in all three committees this week, and on Friday, the House Ways and Means Committee and Education and Labor Committee reported a bill that is deficit neutral for all of the increased costs from new and expanded programs under the health reform section. The House Energy and Commerce Committee will continue its consideration of the legislation into next week.
 
House Bill Fully Pays For Health Reform Policies

Through a combination of $465 billion in net Medicare and Medicaid savings and $583 billion in revenue, the previously estimated $1.042 trillion, ten-year cost of the reform bill, which will provide affordable health care coverage for 97 percent of Americans, is fully financed. On Friday, the Congressional Budget Office (CBO) released an estimate confirming the offsets. The estimate also included a $245 billion cost for Medicare physician reimbursements under existing law that will be exempted under statutory Pay-As-You-Go (PAYGO) legislation to be considered in the House next week.
 
CBO Score Includes Physician Payment Adjustment to Prevent Scheduled Reduction Under Existing Law

The costs of SGR are not increased spending for a new policy, but rather the costs of maintaining our existing policy to prevent a cut in physician rates. The physician payment formula in the bill reforms the Medicare physician payment formula to better align incentives toward quality and efficiency - without increasing overall spending above the amount necessary to simply maintain physician payments above their current reimbursement rates - instead of allowing a currently scheduled dramatic reduction in physician payment rates to take effect.  The costs of the SGR are not increasing the deficit relative to current policy, but rather reversing dramatic cuts in spending below current policy scheduled under current law.
 
Statutory Pay-As-You-Go (PAYGO) Legislation on the House Floor Next Week

Legislation providing for statutory PAYGO will be voted on in the House next week. The rule for stat PAYGO will direct the Chairman of the House Budget Committee to use the provisions of the House Budget resolution to measure compliance with the House PAYGO rule by excluding the costs of continuing certain policies currently in place, including the current Medicare physician payment policy. According to CBO, the costs of extending the Medicare SGR freeze in effect for 2009 would cost $245 billion over ten years under the most recent assumptions. The costs of the Medicare physician payment provisions in the bill are lower than the costs of extending the SGR freeze and therefore will not be subject to the House PAYGO rule. Click here to read more on House PAYGO legislation on the Floor next week.
 
Long-Term Savings Not Reflected In CBO Estimate

The House bill contains policies that take crucial steps toward making health care spending more efficient over the long term and increasing the value that we are getting for the dollars that we spend. It incorporates programs and procedures designed to significantly constrain out-year costs. The potential savings from these reforms are not included in the CBO cost estimate because the nature of these new, innovative methods means that there is little or no information available to assist CBO in their cost analyses.
 
As CBO Director Doug Elmendorf himself noted in a June 16th letter, “…many of the specific changes that might ultimately prove most important cannot be foreseen today and could be developed only over time through experimentation and learning.  Modest versions of such efforts – which would have the desirable effect of allowing policymakers to gauge their impact – would probably yield only modest results in the short term.”
 
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