The New Health Dialogue

The Robert Wood Johnson Foundation and the Urban Institute’s John Holahan and Linda Blumberg have published a set of three short (and informative) briefs on health care and the economy. Takeaway points included the fact that although health care is a big part of the economy, the changes we’re making in health care aren't all that big in the context of the overall economy. And much of the talk about the economic impact of health care is focused on tax and spending changes to the status quo -- not how the tax and spending changes may interact (albeit in hard to forecast ways) with a health care delivery system that will change and evolve as new models and incentives unfold.

Here are some of the bottom line conclusions from the three papers (any emphasis added is ours):

1) Will Health Care Reform Hurt the Economy and Increase Unemployment?

The authors write:

Despite fears expressed by some in the political arena, health reform is not likely to have a significant direct effect on the U.S. economy or on employment. The changes in spending and taxes in health reform generally have offsetting effects and are simply too small relative to the overall size of the economy, to have much of an impact

2) How Will the Patient Protection and Affordable Care Act Affect Small, Medium, and Large Businesses?

Blumberg's analysis suggests that small businesses probably have the most to gain. There’s no mandate, they can get tax credits, and they will be able to get better coverage options in the exchange than they currently can in the small group market. The exchanges will be better regulated, more transparent, and will distribute risk better among the healthy and the not-so-healthy.

Medium-sized businesses, with 50 to 100 workers, should also benefit from using the exchange -- but they could also face penalties "if their modest income, full-time workers obtain federal subsidies due to a lack of affordable coverage available through the workplace."

Generally speaking, big businesses won’t see much change although there is the possibility of higher costs if more workers (or their dependents) take up employer-sponsored insurance. They too could face penalties if lower income workers go through exchanges and get subsidies.

3) Will Health Care Reform Increase the Deficit and National Debt?

Holahan writes:

The CBO has estimated that health reform will reduce the deficit primarily because cuts in Medicare combined with new revenues will more than offset new spending, and that the deficit reduction effects will increase over time. The CBO projections may have underestimated spending growth but probably not in any significant way. There is some chance that the cost of Medicaid expansion and subsidies to individuals and families could be higher than expected. Some of the indexing provisions that begin in 2019 may be difficult to sustain. [ie: Congress may not stick to its guns on those payment trends.] Similarly, the cuts in Medicare also may be difficult to sustain over the long-term.

On the other hand, the CBO may have underestimated the effectiveness of the many cost-containment provisions in the bill -- the increased competition within exchanges, the taxes on high-cost health plans, and such cost-containment initiatives as accountable health organizations, medical homes for the chronically ill, comparative effectiveness research, and many prevention measures. There will also be a major new effort to improve the management of care for dual eligibles. There are many other ways the government could strengthen cost-containment provisions if CBO estimates prove too optimistic.