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Report: Overhaul would raise health care costs

/ Source: The Associated Press

Democrats trying to push President Barack Obama's health care overhaul plan through the Senate got a sober warning Friday that costs will keep going up and proposed Medicare savings may harm the program.

A new report from government economic analysts at the Health and Human Services Department found that the nation's $2.5 trillion annual health care tab won't shrink under the Democratic blueprint that senators are debating. Instead, it would grow somewhat more rapidly than if Congress does nothing.

More troubling was the report's assessment that the Democrats' plan to squeeze Medicare for $493 billion over 10 years in savings relies on specific policy changes that "may be unrealistic" and could lead to cuts in services. The Medicare savings are expected to cover about half the nearly $1 trillion, 10-year cost of expanding coverage to the uninsured.

In still more bad news, the report starkly warned that a new long-term care insurance plan included in the legislation could "face a significant risk of failure" because it would attract people in poor health, leading to higher and higher premiums, and eventually triggering an "insurance death spiral." Sen. Chris Dodd, D-Conn., brushed that aside, pointing to an analysis by the Congressional Budget Office that found the program would be solvent for 75 years.

The one bright note: The bill would provide coverage to 93 percent of U.S. residents, reducing the number of uninsured people by about 33 million, the report said.

The analysis from the Office of the Actuary, which does long-range cost estimates for Medicare, was prefaced by a disclaimer saying it does not represent the official position of the Obama administration. Unlike estimates from the budget office, which have mainly focused on the legislation's impact on the federal deficit, the actuaries looked at total public and private costs over the next 10 years.

The analysts also used their years of experience with Medicare's finances to make a judgment call on whether the cuts proposed in the Democratic bills are politically sustainable. When previous Congresses have cut Medicare too deeply, providers have usually convinced lawmakers in subsequent years to restore at least some of the money. That same scenario is playing out this year as doctors try to persuade Congress to permanently repeal automatic spending cuts that would reduce their Medicare fees 21 percent next year.

The actuaries' analysis of the Senate bill echoes their previously released reports about the House bill. It addresses core provisions of both bills, and is unlikely to be affected by the latest changes Senate Democrats are proposing.

Republicans seized on the report as validation of their concerns that the overhaul bill is both unaffordable and unrealistic.

"This report confirms what we've long known — the Democrat plan will increase costs, raise premiums, and slash Medicare. That's not reform. This analysis speaks for itself. This bill is a sham," said Senate Republican Leader Mitch McConnell of Kentucky.

Sen. Pat Roberts, R-Kansas, said release of the report was "almost like Pearl Harbor — a day of infamy."

Democrats have sought to deflect the criticism by playing up the conclusions of the budget office, which show the bills would reduce the federal deficit and are not likely to drive up premiums for most people with job based coverage.

The actuaries' report projected that national health care spending would rise by an additional 0.7 percent under the bill from 2010-2019, mainly because newly insured people would be able to receive medical care they wouldn't otherwise have gotten.

In response, White House health care spokeswoman Linda Douglass emphasized the report's finding that "reform will have 'a significant downward impact on future health care cost growth rates.' As savings from reform kick in, national health expenditures are projected to increase at a slower annual rate under the Senate bill than under the status quo."

The findings on Medicare are a bigger problem for Democrats. The report suggests the Democratic plan hit the brakes too hard trying to hold down the growth of payments to hospitals, nursing homes, home health agencies and other service providers. And that could reduce access for seniors.

"Providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable," the report said. "Absent legislative intervention, (they) might end their participation in the program, possibly jeopardizing access to care for beneficiaries."

If the cuts stay in place, about one-in-five hospitals, nursing homes, and home care agencies could find themselves going in the red, the report said.

Also Friday, Sen. John Cornyn, R-Texas., head of the National Republican Senatorial Committee, sent a memo to Republican senators and candidates suggesting it was good politics to oppose the health overhaul, citing polling showing it is unpopular with the public.

"The Democrats' massive health care bill, coupled with their support for out-of-control government spending, are quickly developing into potent political issues for us," Cornyn wrote, urging Republicans to "continue to stand together in opposition to the Democrats' bill."

And in the latest offensive by foes of the overhaul effort, two business groups have begun airing a multimillion dollar TV ad campaign attacking the health legislation as a threat to the economy. The ads are scheduled to run through next Wednesday on national cable and in nine states whose senators are seen as wavering or politically vulnerable on the issue, including Arkansas, Connecticut and Maine.

"Congress' latest health care bill makes a tough economy even worse," says one of the two commercials. The spots are sponsored by Employers for a Health Economy and Start Over!, coalitions that between them represent more than 200 large and small business associations.