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  • The President's Health Plan Won’t Cut the Budget Deficit

    President Obama with Doctors

    One of the central arguments President Barack Obama has made on behalf of the health care plan he wants Congress to approve in coming weeks is that it would begin to address the problem of rising costs and thus also begin to bring down future federal budget deficits.

    But will it?

    The president’s plan has not yet been assessed by the Congressional Budget Office. But CBO has provided a cost estimate for the Senate-passed bill, upon which the president’s proposal is built. That estimate shows the Senate bill would reduce the budget deficit by $132 billion through 2019. CBO also says that the Senate bill would likely reduce projected deficits even more during the second decade of implementation.

    But, as Republican Rep. Paul Ryan of Wisconsin noted at last week’s Blair House meeting, there are a number of reasons to be skeptical about this claim.

    For starters, the Senate bill omits the president’s proposal to permanently restore a 21 percent reduction in Medicare’s fees for physician services, now in effect as of March 1. The administration estimates that overriding this cut will cost $371 billion through 2020. Last summer, the House planned to include a permanent repeal of the cut in its health reform bill. But when the president imposed a 10-year budget of $900 billion on the reform legislation, Democratic leaders decided to pull the physician fee spending out of it and pass it separately.

    The health bill includes scores of Medicare provisions, touching on just about every aspect of the program. The only major Medicare provision not in the bill is the costly “doc fix.” And the only reason for the omission is to make the total cost of the health reform bill appear lower. But passing the “doc fix” in a separate bill doesn’t make the cost go away. When the president’s entire health care agenda, including the “doc fix,” is tallied up, there is no deficit reduction over the next 10 years.

    Ryan noted in his remarks at Blair House that the Senate bill would start up a new long-term care insurance program for the disabled. Participants would be required to pay in premiums for a number of years before becoming eligible for any benefits. Consequently, in the new program’s early years, there would a surplus, which CBO estimates at $73 billion over 10 years. The president’s claim of deficit reduction depends on double-counting these funds, first as an offset for the larger health care bill and then as a revenue source for long-term care insurance benefits beyond the 10-year window of the CBO estimate.

    Over the long run, what matters in terms of the budget in the president’s health plan are the entitlement expansions, the effectiveness of “bending-the-cost-curve” measures, and the tax increases and spending cuts used to pay for broadened insurance coverage.

    CBO expects the cost of the new entitlement spending aimed at coverage expansion in the Senate bill – the premium subsidies in the exchanges and the expansion of Medicaid — to reach about $200 billion by 2019 and then grow at a rate of 8 percent every year thereafter. In other words, this new health entitlement spending is expected to escalate just as rapidly as Medicare and Medicaid have in the past. CBO does not expect the “delivery system reforms” in the Senate bill, which are mainly small initiatives and pilot programs, to amount to much of anything in terms of cost control.

    So how would the president pay for another expensive and rapidly growing entitlement? First, he would try to slow the rate of growth in the Medicare program, but not with new measures to weed out wasteful spending. His claim of long-term deficit reduction comes mainly from across-the-board payment rate reductions for hospitals, nursing homes and other providers of Medicare services. They would get a lower inflation update every year, in perpetuity. But these kinds of cuts do nothing to improve the efficiency of patient care or reward quality.

    The chief actuary of the Medicare program has said repeatedly that these cuts are unrealistic because they would continuously cut reimbursements without touching the actual costs of providing care. He expects many facilities would be driven into serious financial distress. And without these Medicare cuts, the Senate bill is almost certainly a long-term budget buster.

    The Senate bill also includes the so-called “Cadillac tax,” a new fee imposed on insurers and employers offering high-cost plans. As passed, this provision would generate substantial revenue in the second decade of implementation because the threshold for what constitutes “high cost” would rise much more slowly than medical inflation. Eventually, virtually the entire country would be in plans deemed “high cost.”

    The president is relying heavily on the large, second-decade revenue increase associated with this tax for his claim of long-term deficit reduction. But just last week, under heavy pressure from union leaders, the president proposed to delay the tax from 2014 to 2018, well past the point when he will have left office. It will now raise almost nothing over the next 10 years, but the administration still claims credit for the sizeable revenue that would come in a second decade. That revenue would materialize, however, only if future officeholders were more willing than their counterparts today to impose large new taxes on a broad cross-section of the American middle class.

    The federal government is piling up new debt at rates not seen since World War II. As Warren Buffett said recently, what the country desperately needs is a serious plan to slow the pace of rising health care costs.

    What the president’s plan would deliver, however, is dead-certain entitlement spending, financed with speculative revenue and spending cuts that almost certainly will not work as advertised. The president says Congress should pass his plan to improve the budget outlook. In fact, Congress should reject it to protect the budget from more unfunded entitlement obligations.

    Cross-Posted on Kaiser Health News

    Posted in Obamacare [slideshow_deploy]

    12 Responses to The President's Health Plan Won’t Cut the Budget Deficit

    1. Pingback: Still trying to own a home? | Current Events: mySpot4news.com

    2. Gary Morgan, Alabama says:

      The Democrat health care plan fails to deal with one of the overwhelming costs involved in health care: malpractice insurance. Health insurance companies are merely paying doctors, who then pay most of what they receive from the health insurance companies to pay their malpractice insurance. Malpractice insurance for most medical practices is the single major cost they have and is their only protection from the virtual extortion of malpractice ligitation and jackpot jury awards by attorneys who work on a commission basis. States (like Texas under Bush) who have placed reasonable caps on malpractice awards have seen their health insurance costs plummet. This reality isn't being effectively communicated in the media–rarely is "tort reform" ever mentioned and when it is, no explanation of what I just described is presented. Most people aren't aware of what single major factor continues to drive health care costs skyward and no one seems capable of discussing and clarifying the vicious cycle to the American population. Please Heritage, start to hammer this point home in your media communications.

    3. Pingback: Must Know Headlines 3.6.2010 — ExposeTheMedia.com

    4. Red Chalkton, MN says:

      Obama's shell game has been in full swing on his healthcare chicanery. Meanwhile, many well-intending (supporters of socialized medicine are all too ready to embrace impossible equations ("We can add 40 million people to health insurance coverage and yet save money doing so!"). There's a great dissection of the psychology of this here http://wp.me/pMW8w-4Y

    5. RogerD Henderson. Nv says:

      The above picture says it all. P U more Omaba POO

    6. Juliana Cheng, Santa says:

      What am I going to do if the health care reform mandate all to carry medical/health insurance?

      I was fired and not eligible to be rehired by the last full time employer back in 2004. After a hearing, I received unemployment benefit which exhausted in 2005 and most of the amount received went to Cobra health insurance coverage.

      Although I was healthy enough to hold two to three part time jobs at the same time since then to get by since then. Unfortunately, body changes resulted in a medical necessary major surgery plus an unwanted complication that happened in Nov. of 2008, resulted in an unwanted necessisty to find and change of "career" to cope with the "disabilities" which still needed to be approved by the evaluators working on my case at the Social Security Disability Insurance Office.

      I have been fasting. Sitting at home (my parent's home) etc. to avoid going bankrupt. I am on the edge of terminating my health insurance so that I can finish up paying the medical bills which I could not catch up in paying in full. The amount is adding up to almost five digits again…..

      Socialist medicine sounds like a great idea. Thinking back to the good old days back in the British Crowned Colony of Hong Kong where my Dad practiced socialist dentistry for over 25 years. Yes, he was overwhelmed with patients and he could not turn them down. We kids missed out spending time with Dad for he worked six days a week 9am to 6pm and 24hour on call for emergencies. That's the good things about socialist medicine because those whom could not pay or have no money to pay, can still receive free services from the health professionals and get away with it! And the free fillings that he put in on my cavities, are still intact after thirty nine years!

    7. Billie says:

      Everything the government majority and it's leader is doing, is all effort to collapse the economy and the people within. They have to bribe both sides with our money to get their side to vote for this danger to America. There is NOTHING to trust about this government, they do not listen to the people and they lie, cheat and steal to get their way, which is control over us…

      All actions of government, will continue to result in all government crisis', predicted.

    8. Jeanne Stotler,Woodb says:

      I for one would like to see how adding people to the rolls to get FREE health care lowers the cost. I was a nurse in a Florida hospital, run by the Catholic Church but also the only ones to accept medicaid patients. When a patient cannot pay, or the repayment comes from county or state is lower than what the care cost, guess what? that cost is past on to the paying patients if not the hospital fails and closes. As it looks now, there will be many hospitals closing and doctors and nurses leaving the health care proffession, if this happens I can assure you cost will soar and quality of care will go down. I took 2 sem. of bookkeeping in College and it's all simple math. If the amount going out exceeds the amount coming in you incure DEBT, too much debt leads to bankruptcy. If BHO has another way I'd sure like to see his math.

    9. Ben C. Ann Arbor, MI says:

      Juliana Cheng, sadly, there is no free lunch. If you visit US Debt.org you will find your "free lunch" has put the USA in debt in the amount of 107 trillion dollars for unfunded liablities in social security, medicare and medicaid. While your vision is one of your dad working twenty four seven, picture yourself and any offspring at best living the lifestyle of a peasant while the USA struggles to pay off the above debt. If you enjoy socialized medicine move to Canada – but live close the the US border. In Windsor most acute medical problems are shipped to the US if the patient has any money because of the backlog in the Canadian medical system. I have many clients who work in the health field in Detroit that tell the same story so it has credibility. Otherwise, don't get sick in Canada because it will be months for the medical system to get to you and you might be dead.

    10. John B. says:

      Ms Cheng, with all due respect your comments say it all; here they are

      "Medicine because those whom could not pay or have no money to pay, can still receive free services from the health professionals and get away with it!"

      First of all "get away with it!"…..what are you expressly implying?

      Second "recieve free services"…… nothing is free Ms Cheng, who is paying for this service?

      The argument that we are all due eternal life "Which IS The Augment Presented" in universal healthcare is false!

      We were all offered eternal life in "The Garden of Eden" we refused eternal life.

      Now we want it back; well search out Christ you will have eternal life and Obama has no credibility, Obama is not God.

      Obama I searching out eternal with this “Stem Cell Research” Our true God will deny him.

      Congressman Ryan represents the best argument that Obamacare is representing false promises fiscally, physically, and morally.

      God Bless America

    11. Jim Carlin (Algonqui says:

      What we need is an independent analysis of the real price of waste in the Healthcare System. The link below will show you one analysis by PwC. See page 6 in particular.

      At the fake Obama Healthcare Summit he emphatically denied that Tort Reform and Defensive Medicine (driving by high insurance rates and Tort awards) is the biggest cost of waste in the System. Yet this study shows it as # 1. Of course the Trial Lawyers are very big contributors to the Dems.

      Does anyone have any other independent analysis?



    12. Pete, MN says:

      I am a doctoral nursing student and do not for a minute believe that the solution to our health care crisis is an easy one or a one sided one. I have been on several blogs both conservative and liberal but have yet to find what I am looking for… less name calling and finger point and more about "here's what I believe we can do to help XYZ and can you help by doing ABC"… or a 1-100 item to do list that leadership commits to getting done now with an agreement (contract of sorts) to revisit the next 10 things that are a mess two years from now. This back and forth bickering and finger pointing is not going to resolve anything… please agree to disagree and get something done now for all patients, providers, and payers.

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