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By:  Michelle Pascucci

There has been ongoing discussion on how the new health care law will be paid for and if it will save money. The Center for American Progress released a report detailing how the new law will lower the deficit and create a more efficient and cost effective health care system in the United States. According to the report there are four categories of that help to slow the growth of health care costs:

1.      The Congressional Budget Office (CBO) stated that the law is fully funded, strengthens the Medicare trust fund, and reduces the federal deficit. This will be done by adjusting prices and implementing measures to increase efficiency in hospitals, nursing homes, and home health providers. These reforms are predicted to slow growth by 1.3% and decrease the deficit by $143 billion between now and 2019, followed by $1.2 trillion between 2019 and 2029.

2.      Effective implementation of the health law takes several steps to lower administrative costs by limiting the percentage of your premiums that can be spent on them. Through limiting the administrative costs of health care, consumers are predicted to save $211 billion between 2014 and 2020.

3.      The law modernizes the health care payment and delivery system. By transitioning our health care system into the “information age” we can save time and money on payment and delivery systems in our health care system.  The law also creates incentives for efficient and effective care and shifts away from the fee-for-service system that is currently in place. The law “establishes mechanisms to innovate, evaluate, adapt, and broadly apply effective payment incentives.” This will be done within the Medicare system with explicit ways to extend these reforms to the private sector.

4.      Modernizing our health care system by effectively implanting the health reform law will do more to reduce the deficit and slow growth than expected. Creating a health care system centered on preventative care saves money in the long run.  Reducing administrative costs, utilizing technologies, and coordinating care will save an estimated $406 billion dollars in the health care system and $127 billion within Medicare.

The entire report, appendix (with key provisions), and charts can be found at: http://www.americanprogress.org/issues/2010/06/cost_containment.html

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