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Health Care Cuts and the Deficit

According to the Congressional Budget Office’s latest 10 year budget projection, the accumulated federal deficits in 10 years will total over $7 trillion dollars.  Spending on health care alone will double in that time period.  That is why changes to Medicare and Medicaid, infamously untouchable in previous budget considerations, are finally on the table.  Incredibly, changes to the biggest expansion of government health entitlements, the Patient Protection and Affordable Care Act, are not.

Why not?  Because it was passed as a cost saver.  We know, however, it’s a budget buster.  You can’t increase Medicaid enrollment by 16 million people,  begin subsidizing health care for the middle class, force insurers to accept all applicants at the same cost, create 159 new federal programs and bureaucracies to make it all happen and save money while doing so.  Meanwhile, existing health care entitlements are already proving unsustainable:  Federal Medicare costs for each individual average now 3 times what the person contributed while state budgets, already in crisis, are being over-run with Medicare expenses.

Given the facts, how can anyone say that expanding health care entitlements like this can save money?  It can’t but the truth is held hostage by the methods used to calculate the cost of the bill.  Congress charges the Congressional Budget Office (CBO) with estimating the cost of each piece of legislation but stipulates that the CBO must accept, without reservations, all estimations, assumptions, and statements within the bill.  Regardless of how implausible or illogical its contents, any proposed law must be estimated without questions or caveats by the CBO.   The Affordable Care Act is the result.

To ensure its passage, the bill was crafted with a number of implausible and downright dishonest assertions.  Among them:

- stating that doctors’ fees would be reduced by 23% but passing a separate law reinstating the fees
- assuming Medicare costs would be reduced by $575 million although health care experts felt this was unrealistic and even dangerous to elder health care
- calculating the bill’s net cost using 10 years of revenue but only 6 years of major expenses
- double-counting benefits by claiming cost cuts to Medicare and Social Security scored as savings to those programs and the Affordable Care Act
- not counting the costs to States for the additional 18 million people being added to their Medicaid roles.  (Initial federal aid to the states to cover this is only temporary.)
- not counting the higher insurance rates that would be incurred by all people when insurance companies would be required to accept everyone at the same relative cost.
- claiming the revenue from a long-term-care program, Community Living Assistance (CLASS) without including the cost of the program
- framing a 2700 page bill with countless references to regulations, agencies, scope, and timeframes that are to be defined sometime in the future, making the calculation of the involved costs impossible

These sleight of hand accounting maneuvers did not go unchallenged, however.  In March, 2010, just before the bill passed, the Douglas Elmendorf, CBO director, sent a letter to Congress, in effect a warning, stating that the accuracy of the CBO cost estimate of the health care reform bill was dependent on the accuracy of the assumptions made in the bill.  He also expressed doubts about the probability of reducing doctors’ fees and the huge ‘savings’ projected for Medicare.  Another expert, the respected Chief Actuary for Medicare, Richard Foster,  reported that the health care reform bill would increase, not decrease, government health care spending.  In addition, he feared senior health care would be jeopardized if the $575 million cut to Medicare was implemented. Foster reiterated his opinion in a January 2011 House Budget Committee hearing saying the Affordable Care Act would not keep health care costs down.  Another authority, former CBO director, Douglas Holtz-Aiken, estimated that, after removing the accounting gimmicks, the Affordable Care Act would raise, not lower, federal deficits by $562 billion.

Considering the facts, it is astonishing that the Deficit Commission, charged by the President to propose solutions to bring down our record high debt largely ignored the Affordable Care Act.  Although the Commission stated that federal health care spending was our single largest long term fiscal problem, they focused on changes to Medicare and Medicaid, bypassing the  biggest federal health care program of all time.  Moreover, given the fact that full implementation of the bill is 3 years away, it would be the easiest, least wrenching program to cut.  Why didn’t they include it?

Given the highly charged, politically divisive opinions surrounding the bill, the Commission probably recognized that including changes to the Affordable Care Act to their report would divert attention from the rest of the report.  Instead of a call for action to end the deficit, the report would become fuel in the health care reform debate.  This is unfortunate because, really, the time to stop this budget busting entitlement package is now!

Here’s the danger:  People who ‘perceive they are getting a benefit, regardless of its real value, will resist giving up that benefit.  While people feel strongly about reducing the deficit, a recent Pew Research Center survey revealed that less than 12% wanted to reduce Medicare, a major factor in our growing deficit numbers.   Now we have an opportunity to do something about a huge entitlement, affecting even more people, that will take full effect in 3 years.  If the CBO sees a deficits ahead totaling a whopping 7 trillion dollars in 10 years without taking into account the true costs of the Affordable Care Act,  how much more of a deficit are we really facing?

If we’re serious about reducing the deficit, the Patient Protection and Affordable Care Act must be on the table.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One Comment

  1. [...] government the answer?  With health care entitlements already accounting for most of our record breaking  deficits, it’s not probable.  That [...]

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