Deficit-Reducing Health Care Reform

For decades, rising health care costs have hurt American competitiveness, forced too many families into bankruptcy to get their families the care they need and driven up our nation’s long-term deficits. That’s why, after years of inaction in Washington, President Obama took on the insurance companies to pass comprehensive health insurance reform. Health insurance reform ends the worst practices of insurance companies, which will reduce health care costs and make coverage more affordable for all Americans. And by curbing the cost of uncompensated care, and ending unwarranted subsidies, health reform reduces the deficit by over $1 trillion over the next two decades.

In keeping with the President’s pledge that reform must fix our health care system without adding to the deficit, the Affordable Care Act reduces the deficit, saving over $200 billion over 10 years and more than $1 trillion in the second decade. The law reduces health care costs by rewarding doctors, hospitals and other providers that deliver high quality care and making investments to fund research into what works.

Rising health care costs are a major driver of our long-term deficits, and getting them under control is crucial if we want to grow the economy, create jobs and compete in the world economy. The Affordable Care Act helps us achieve that goal, improving the quality and affordability of health care while preventing many of the worst insurance industry abuses. The law is improving our economic competitiveness by:

Extending coverage to 34 million Americans: For the first time in the nation’s history, the Affordable Care Act ensures that every American has access to quality affordable health coverage. By offering support to purchase coverage in newly created marketplaces or Exchanges and expanding Medicaid, the Affordable Care Act will extend health coverage to 34 million Americans. Access to health coverage is more than a safeguard from hardship that every citizen deserves. It means that instead of foregoing doctors’ visits and other preventive measures because of cost, Americans will get the care they need to prevent chronic diseases, improving their health and reducing burdens on our health care system. And the security of health coverage not tied to a job means that entrepreneurs will no longer fear striking out on their own to start a small business, helping create jobs and boosting economic growth. In short, coverage expansion in the Affordable Care Act will benefit the nation’s personal and economic health.  

Addressing insurance industry abuses: In addition to the important coverage expansions described above, the Affordable Care Act immediately begins to prevent many of the worst insurance industry abuses, correcting market failures and securing coverage for Americans who might otherwise go uninsured.  For example, thanks to the Affordable Care Act, insurers are already prohibited from canceling coverage when someone gets sick and are no longer permitted to impose lifetime limits on coverage.  Preventive benefits are provided without cost sharing in new plans, and insurance must let young adults up to age 26 stay on their parents’ plan.  When fully implemented, insurance companies will no longer be able to deny millions of Americans coverage or charge higher premiums for a pre-existing condition.

Bending the growth curve of health care spending: In keeping with President Obama’s pledge that reform must fix our health care system without adding to the deficit, the Affordable Care Act reduces the deficit, saving more than $200 billion over 10 years and more than $1 trillion in the second decade. The law reduces health care costs by rewarding doctors, hospitals and other providers that deliver high quality care, making investments to fund research into what works, and cracking down on waste, fraud, and abuse.

The Obama Administration has developed new initiatives and expanded successful existing initiatives to build on the successes of the Affordable Care Act:

The Partnership for Patients: A new public-private partnership using tools and $1 billion in new resources provided by the Affordable Care Act will help improve the quality, safety, and affordability of health care for all Americans. The two goals of this new partnership are: (1) keeping patients from getting injured or sicker; and (2) helping patients heal without complication. Achieving these goals will save lives, reduce injuries to millions of Americans, and save billions of dollars that will help put the nation on the path toward a more sustainable health care system. This could reduce Medicare costs by up to $50 billion over the next decade. 

Improving health care through health information technology: Widespread adoption of health information technology ensures patients and providers have access to accurate, private, and secure information. It can improve care quality, prevent medical errors, cut paperwork, and reduce costs—all goals of the Affordable Care Act. The American Recovery and Reinvestment Act invests nearly $20 billion over five years for health information technologies.  And the Affordable Care Act saves over $20 billion over 10 years on administrative simplification in the health system. 

Curbing waste, fraud, and abuse in Medicare, Medicaid and other health care programs: The Obama Administration has taken strong action to fight waste, fraud, and abuse by providing critical new tools to crack down on entities and individuals attempting to defraud health care programs. For example, the Affordable Care Act makes it easier to screen providers who want to join Medicare so we can determine if they’re legitimate providers or criminals trying to scam the system. The new law also enhances penalties for anyone who commits fraud, and increases the federal sentencing guidelines by 20 to 50 percent for major health care fraud offenses. We know these efforts to fight waste and fraud are working. The Health Care Fraud and Abuse Control program has already returned $10.7 billion to the Medicare Trust Funds. The number of individuals charged with criminal fraud increased from 797 in FY 2008 to 1,430 in FY 2011 — an increase of more than 75 percent. One initiative, the HHS/DOJ Strike Force, has charged more than 1,000 individuals who collectively have falsely billed the Medicare program for more than $2.3 billion. The Affordable Care Act also provides additional tools to help prevent fraud and abuse that will achieve $1.8 billion in savings through 2015.

While the Affordable Care Act was an historic step toward getting health care costs under control, there is still more that we can do to realize efficiencies, cut waste, and improve Federal health care programs. Most importantly, we can make modest adjustments to strengthen Medicare and Medicaid in a way that does not undermine the fundamental compact they represent to our nation’s seniors, children, people with disabilities, and low-income families. For this reason, the President's Plan for Economic Growth and Deficit Reduction included proposals to save approximately $320 billion in federal health spending over the next decade. As these reforms save money, they also will strengthen these vital programs so that they are robust and healthy to serve Americans for years to come.

The $248 billion in proposed Medicare savings extend the life of the Medicare Trust Fund by roughly three years. The $73 billion in savings proposed in Medicaid and other health program include phased-in reforms and targeted savings and flexibility for States.  More specifically, the President’s proposals:

Taken together, the President’s plan is the most fair and effective way to keep the promises made to all Americans while achieving the deficit reduction needed to win the future.