The Burrill Report


As the U.S. Supreme Court decides the fate of the Patient Protection and Affordable Care Act, a new report from the Government Accountability Office says that healthcare costs could soar if the law is overturned, further adding to the long-term challenge posed by the federal deficits and debt.

In its latest update of the federal government’s long-term fiscal outlook, the GAO makes projections based on two models, one baseline model that generally reflects current law, and another alternative model that assumes cost-containment mechanisms are not sustained over the long term. Even with the Affordable Care Act implemented as intended, the “structural gap between revenues and spending driven by rising healthcare costs and demographics” would not be closed, according to the GAO.
But spending on healthcare would grow “much more rapidly” in the alternative scenario, causing spending on Medicare and Medicaid to grow to more than 8 percent of GDP by 2030 from 5 percent of GDP in 2010. The baseline model finds Medicare and Medicaid growing to 7 percent under the baseline simulation, it says.

While growth in healthcare spending in 2010 slowed to the second lowest rate since 1960, according to The Medicare Payment Advisory Commission, an independent Congressional agency, the slowdown was primarily due to the lingering effects of the recent financial crisis. Projections of healthcare spending through 2020 show it will continue growing as a share of GDP.

“GAO’s simulations lead to an overarching conclusion: current fiscal policy is unsustainable over the long term,” the agency says. “Absent reform of federal retirement and health programs—including Social Security, Medicare, and Medicaid—federal budgetary flexibility will become increasingly constrained. Assuming no changes to projected benefits or to revenues, spending on these programs will drive increasingly large, persistent, and ultimately unsustainable federal deficits and debt as the baby boom generation retires.”

The ultimate fate of the health reform law remains in the hands of the United States Supreme Court, which is expected to rule on whether or not to uphold the law in June. Meanwhile, implementation of various aspects of the cost-cutting initiatives in the law, including the creation of state health insurance exchanges and the creation of accountable care organizations, are already underway.







April 06, 2012
http://www.burrillreport.com/article-gao_sees_gloomy_fiscal_outlook_without_health_reform.html