CHICAGO — The House version of health care reform stands to save state and local governments about $24 billion over the next 10 years, while the Senate leadership's proposal could potentially cut state costs by $83 billion, according to a new study comparing the fiscal impacts of the plans.
Meanwhile, hospitals face a loss in income of $27 billion in the House plan and $29 billion in the Senate measure.
The largest source of potential savings under the proposals would come from reductions in spending under state and local government safety-net programs such as public hospitals and clinics, with the Senate version resulting in savings of $115 billion and the House in $113 billion in savings between 2010 and 2019.
Due to the expansion in insurance coverage, safety-net providers would be reimbursed for the services that under current law they would have provided free to the uninsured, so providers would see an increase in net income. That funding could be used either to provide additional services or reduce state and local funding for these providers, according to the study conducted by the Lewin Group for the Peter G. Peterson Foundation.
The study's lead author, John Sheils, a vice president at the Lewin Group, cautioned that the potential savings are complicated by the requirement that some legislative body, such as a county board that manages the region's safety-net services, must act to capture the potential savings by shifting funding for hospitals.
"If there's no change, then the local or state government doesn't realize the savings," he said.
The overall savings would be offset, however, with increased spending required for other state programs, including worker health benefits. The study — "Comparing the Cost and Coverage Impacts of the House and Senate Leadership Health Reform Bills: Long Term Costs for Governments, Employers, Families and Providers" — takes a long view, comparing the impact between 2010 through 2019 and then through 2029.
The House passed its version last month and after passing a spending bill over the weekend, the Senate has shifted its focus back to health care with hopes of reaching a consensus and voting before the Christmas holiday.
Under the House measure, an expansion of Medicaid would boost state spending on benefits for Medicaid by $59 billion between 2010 and 2019 as states would see an increase of about 10% in those eligible for the subsidies.
The Senate plan would cut state costs for Medicaid and the Children's Health Insurance Program by about $30 billion over the same period due primarily to a 23% increase in the federal matching dollars for children's health care.
"The estimates for both bills reflect reductions in enrollment for people who become covered under newly created employer health plans in response to the employer penalties," the study reported.
Health care benefits for employees would cost states an additional $61 billion under the Senate bill while the House bill would hike costs by $20 billion, with states and local governments having to spend more to cover employees who do not currently have coverage or pay a penalty for uninsured workers.
The expense is greater under the Senate plan because many state and local worker health plans would be subject to the excise tax on high-cost plans. Premiums for state and local workers would also reflect the cost of the other excise taxes created under the bill.
Hospitals would see an overall increase in revenues of $65 billion through 2019 under the Senate plan and $90 billion under the House bill as newly insured people would use more health services. However, once the cost of providing new services is factored in hospitals would actually see an estimated net reduction in income of $29 billion under the Senate bill and $27 billion under the House bill.
"While the hospitals will see cuts in some programs, they will see a surge in income from all the new business," Sheils said. However, the impact is likely to vary widely across hospitals depending upon patient mix, geographic region, and existing payment levels.
Under both bills, about 40% of the newly insured are covered through the Medicaid expansion and 60% through private plans in the exchange, which the study assumes will reimburse hospitals at current commercial levels that are above costs.
The study counts as new revenues a reduction in uncompensated care of about $112 billion for hospitals under both bills is projected.