Will Health Care Law Actually Reduce Health Costs?

Will Health Care Law Actually Reduce Health Costs?

As the nations medical costs have risen (up 5.7% last year), and the economy has declined (1.1%), the Centers for Medicare and Medicaid Services have put forth some interesting projections.

In the next decade, health spending may rise to 6.1%. The figures are projected to reach $4.5 trillion, i.e. almost 20% of the economy.

Karen Ignagni, president of America Health Insurance Plans believes that ‘the cost crisis needs to be addressed as underlying health care costs are exploding’.

It seems like President Obama’s health care overhaul will benefit poor and sick Americans, making it simpler for them to get and keep insurance. But in spite of White House assurance, there is uncertainty whether this re-hauling will reduce health care costs for the majority of the country.

Peter Orszag, White House budget director, says the new law will eventually create a health care system that charges for the quality of care, rather than the quantity. This he believes will bring prices down and in turn reduce health care costs for everyone.

The law has in place a number of initiatives that could keep costs down.

• Programs like the Mayo Clinic,promote physician and hospital services under one roof. They also pay for efficient prevention and management of illnesses. This means that the patient will no longer have to pay for each visit or medical test.

• Recommendations on holding down both private sector and Medicare spending will be offered by an Independent Payment Advisory Board.

• Doctors and other health care providers can access valuable research into the effectiveness of medical procedures, based on a demonstration program.

•Programs to standardize insurance forms, codes and billing procedures will be established. At least 85% of group-plan premiums and 80% of individual plan premiums must be spent on care. Insurers who fail to reach this target will have to offer refunds.

If done correctly, health experts believe that America will pay way less than it has been paying. Supporters believe that the law will make the government more responsible for the rate of spending growth.

But Obama’s big peeve-the health insurance industry, that recently increased premiums in California and other states, argues that the problem could be solved by looking into the prices charged by doctors, hospitals, drug-makers, etc.

Ralph Neas, CEO of the National Coalition on Health Care says, “The only way you can keep premiums down is to make sure the pharmaceutical costs, the doctor costs, the hospital costs, the medical device costs, everything else does not continue to grow at double-digit inflationary rates.”

In fact, a deal was struck last spring between insurers, hospitals, doctors, drugmakers, medical device manufacturers and labor unions. They jointly decided to reduce projected costs by 1.5% annually.

Ironically, this deal never made it into law.

If it had, Neas believes, it would have saved a family of four more than $5,000 a year in health care costs before the end of the decade.

“It’s a good start, but it is not enough,” Neas says.


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