Medicare Program Changes in H.R. 3962, Affordable Health Care for America Act Page: 5 of 66
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Medicare Program Changes in H.R. 3962, Affordable Health Care for America Act
CBO estimates that the provisions in H.R. 3962 that would affect the Medicare, Medicaid,
Children's Health Insurance and other federal programs would reduce direct spending by $426
billion over the FY2010-FY2019 period.6 Of this total, Medicare (absent interaction affects)
accounts for $461.3 billion of the reduction; however, these spending reductions are offset by
spending increases in Medicare, Medicaid, and other federal health care programs. Medicare
reductions in direct spending over the 10-year period are estimated to be $502.6 billion, offset by
Medicare payment increases of $41.3 billion.' CBO estimated that Medicare spending under the
bill would increase more slowly over the next 20 years compared to the past 20 years-a 6%
average annual rate compared to the prior 8%.
As noted by CBO, the provisions that would result in the largest savings are as follows:
" Permanent reductions in the annual updates to Medicare's fee-for-service
payment rates (other than physicians' services) would account for an estimated
budgetary savings of $229 billion over 10 years.8
" Using per-capita spending in fee-for-service Medicare to set rates for MA plans
and changing the way MA payments are adjusted to account for health status
would account for an estimated $170 billion in savings (before interactions) over
" Changes in Medicare's prescription drug program (Medicare Part D) that would
reduce the cost of drugs, expand coverage, and increase efficiencies would
account for an estimated $50 billion in savings over the same period.
There are differing views about whether (and to what extent) Medicare savings should be
considered as offsets to fund the expansion of health care coverage or, alternatively, should be
used to secure the financial solvency of the Medicare program. The latter position is captured in a
July 16 letter sent by 36 Republican Senators to the Senate Majority Leader discussing the need to
use potential monies resulting from Medicare reform to ensure its future financial stability.9 The
alternative position that health insurance reform and the attendant changes to Medicare would
bolster the program's solvency (and improve beneficiaries' access to care) is asserted in an eight-
page report released by the Department of Health and Human Services (HHS) on August 27.10
6 The estimated overall effect of the proposed legislation is a net decrease in the federal budget deficit of $104 billion
over the FY2010-FY2019 period. The projected 10-year cost of increasing insurance coverage of $894 billion is offset
by the net spending decrease of $426 billion and by revenue provisions that are estimated to raise $572 billion over the
7 H.R. 3962 does not include changes to the sustainable growth rate (SGR) formula used to set Medicare physician
payment rates. A provision in H.R. 3200 would have made permanent changes to that mechanism. CBO estimated that
the change would have added about $245 billion to CBO's net cost of that bill.
8 This estimate excludes interaction effects including the impact on these reductions to payments to Medicare
Advantage plans and on the collection of Part B premiums.
9 See http://corker.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=ad9l 1e30-d2e2-43ae-9261-
aelebf6626b3 accessed 10/30/2009 for a copy of the letter.
10 See http://www.hhs.gov/news/press/2009pres/08/20090827a.html for the HHS press release and
http://www.healthreform.gov/reports/seniors/index.html for the report.
Congressional Research Service
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Medicare Program Changes in H.R. 3962, Affordable Health Care for America Act, report, November 5, 2009; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc810680/m1/5/: accessed May 23, 2019), University of North Texas Libraries, Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.