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Congress Should Fix the Current Health Care Deficit

Posted By Alison Acosta Fraser On September 21, 2009 @ 11:50 am In Economics | Comments Disabled

The President and his administration keep saying [1] we cannot afford not to push through a major overhaul to the health care system, one-sixth of the U.S. economy. They’re partially right in that we do have a massive problem we can’t afford not to fix. But the focus is all wrong. Instead of creating a new federal health program, Congress needs to address the spending for Social Security, Medicare and Medicaid [2] — programs that have existed for decades — that is set to explode.

Long-term excess costs for Social Security and Medicare alone are $43 trillion [3]. When added to the national debt, that is about $184,000 for every man, woman and child in the U.S. America’s seniors are going to have to make some tough sacrifices so younger generations like their children and grandchildren aren’t saddled with massive debt to pay for these programs. But forcing them to make these sacrifices in order to create massive new benefits for others is not the way to go about it.

The more important question right now is how much the nation would actually spend for these proposed reforms to the health care sector. After all, spending must be paid for by either raising taxes or borrowing. The House health care bill would spend roughly $1.3 trillion while the newest Senate bill [4] would spend around $800 billion — both of which are too big. So how would President Obama pay for his new health programs?

Squeezing Medicare sounds OK, doesn’t it? But it would cut payments to doctors and other providers, on top of Medicare’s already reduced payment rates, so that really means putting the squeeze on your doctor. Cutting private insurance companies really means taking seniors out of the popular and effective Medicare Advantage program and increasing their out-of-pocket costs.

It also means tax hikes, including some on small business owners, through a high-income “surtax” [5] that would leave America with higher tax rates [6] than Japan, France and Germany, some of our biggest international competitors. And it would mean punitive taxes on insurance companies, crowding out private coverage.

And by expanding Medicaid [7], it would also force the states, whose budgets are already fiscally hemorrhaging to bear the cost, since Medicaid is jointly funded by federal and state governments.

Is Obama’s health care plan really paid for? (Bear in mind there is no Presidential plan, just a blueprint):

  • The Senate Finance Committee bill would cut Medicare benefits for seniors and use the savings to create massive new health benefits seniors don’t qualify for. So, they start with a $43-trillion problem, cut Medicare, increase taxes, pass new benefits and still end up with a $43-trillion problem.
  • The House’s legislation has an even bigger benefit, which also is paid for with new taxes and Medicare cuts. But it isn’t fully funded. The costs aren’t so high in the early years, but by the end of the first decade, they start to skyrocket and would add $9 trillion on top of that $43-trilion problem. That hardly meets the President’s pledge [8] not to sign any legislation that would increase the deficits by one dime — even over the long term.
  • The House version of the President’s health reform is even more alarming because it does bend the health care cost curve, it just bends it UP [9]. That’s why it’s hard to put stock in such things as prevention and wellness to actually result in real savings.

Rather than create a new federal health program, we should focus on reforming the federal health programs so that they’ll be sustainable for generations to come. Remember, we already have a $43-trillion problem that we can’t afford not to fix.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/09/21/congress-should-fix-the-current-health-care-deficit/

URLs in this post:

[1] saying: http://www.whitehouse.gov/realitycheck/541

[2] Social Security, Medicare and Medicaid: http://www.heritage.org/Research/Budget/wm2510.cfm

[3] $43 trillion: http://www.heritage.org/Research/Budget/wm2595.cfm#_ftn4

[4] Senate bill: http://fixhealthcarepolicy.com/key-documents/baucus-health-bill/

[5] “surtax”: http://www.heritage.org/Research/Taxes/wm2556.cfm

[6] higher tax rates: http://www.heritage.org/Research/Taxes/wm2544.cfm

[7] expanding Medicaid: http://www.heritage.org/Research/HealthCare/wm2559.cfm

[8] President’s pledge: http://www.boston.com/news/politics/politicalintelligence/2009/09/obama_tries_to_5.html

[9] it just bends it UP: http://blogs.abcnews.com/thenote/2009/07/cbo-sees-no-federal-cost-savings-in-dem-health-plans.html

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