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  • Health Reform That Breaks the Bank

    During last month’s Blair House health care summit, President Barack Obama was forced to change the subject after Rep. Paul Ryan(R-WI) Blair House thoroughly refuted the President’s claim that his health care plan would reduce the deficit. It took over a week for the White House to respond to Ryan, but last Thursday they finally produced this blog post by OMB director Peter Orszag followed by a Washington Post op-ed Friday titled: Health reform that won’t break the bank. Ethics and Public Policy Center fellow James Capretta responded to the White House that same day at NRO:

    Orszag and DeParle start by agreeing with Ryan that delaying the start date of an entitlement expansion is a tried-and-true budget gimmick, designed to push the full cost of the additional spending outside of the “budget window” covered by a cost estimate.

    But, not to worry, they say. In this instance, it’s not a gimmick because the deficit reduction from their plan just keeps growing over time. They claim the president’s health plan would produce deficit reduction of $100 billion over ten years and $1 trillion in the second decade.

    Of course, there’s another reason besides balancing revenue and spending to push the start of an entitlement back, and that’s to make the ten-year cost look much smaller than it really is. Recall that the president promised in his address to Congress last September to deliver a bill that costs only “$900 billion” over a decade. The new entitlements the Democrats want to create would cost much, much more than $90 billion per year. In fact, the Congressional Budget Office (CBO) says they will cost about $200 billion per year by 2019. And so, to get the media to now say his plan costs only “$1 trillion” (what’s $100 billion among friends!), the administration delays the coverage expansion provisions until 2014. Never mind that the president also says the uninsured can’t wait a day longer for the legislation. Once enacted, he would make them wait — for four years.

    As Ryan noted, however, once the program did get up and running, costs would soar. The Senate Budget Committee Republican staff estimates the Senate bill’s cost at $2.3 trillion over ten years when fully implemented.

    In their Post op-ed, Orszag and DeParle do not even attempt to address the many other points Ryan made which expose the dubious assumptions and sleight of hand behind their deficit-cutting claims.

    For instance, the health-reform bill is filled to the brim with Medicare changes, but the one Medicare provision the president and the Democrats want to pass separately from the health bill is the so-called “doc fix,” which would repeal a cut in Medicare physician fees at a cost of $371 billion over ten years. Of course, splitting their agenda into two or three bills doesn’t change the total cost. When the “doc fix” is properly included in a tally of what the president is pushing, all of the supposed deficit reduction vanishes.

    Then there’s the double-counting that Ryan exposed. The president’s plan starts up yet another entitlement program, providing long-term care insurance. Enrollees have to pay premiums for a number of years before they qualify for any benefits. Consequently, at startup, there’s a surplus of premium collections — $73 billion over ten years, according to CBO — because no one qualifies for the benefits yet. The president and his team count these savings against the cost of health reform — even though the money will be needed later to pay out long-term-care insurance claims. When this gimmick is taken out of the accounting, the president’s health proposal goes even deeper into the red.

    Over the long-run, the administration’s claim of large-scale deficit reduction hinges on the dubious assumption that future elected officials will demonstrate more political courage than those in office today.

    For most of last year, the president said that he would “bend the cost-curve” in large part by imposing a new tax on “high-cost” insurance plans. The tax would hit more and more middle-class beneficiaries each year because the threshold for determining what constitutes a “high-cost” plan would grow much more slowly than medical costs. In fact, after a number of years, virtually all Americans would be in plans at or above the “high-cost” threshold.

    House Democrats and their union allies despise this tax. Last week, the president caved in to their pressure and pushed the start date of the tax back to 2018, well past the point when he will have left office. Even so, Orszag and DeParle still claim credit for the massive revenue hike that would occur in a second decade of implementation. They want us to believe we can finance a permanent, expensive, and rapidly growing new entitlement program with a tax the president himself was never willing to collect.

    In Medicare, Orszag and DeParle like to highlight so-called “delivery system reforms” the administration has touted. In the main, these are extremely small-scale initiatives and pilot programs. CBO says they will amount to virtually no savings. The big Medicare cuts in the president’s plan come from across-the-board payment-rate reductions. In particular, the president wants to cut the inflation update for hospitals, nursing homes, and others by half a percentage point every year, in perpetuity. On paper, this change produces huge long-run savings. But it does nothing to control the underlying cost of treating patients. It just pays everyone less, without regard to patient need or quality of care. The chief actuary of the program has said repeatedly that these cuts are completely unrealistic for these very reasons. If implemented, he expects they would drive one in five facilities into serious financial distress. And yet Orszag and DeParle want us to believe these savings can be counted to finance the president’s massive entitlement promises.

    And massive they are. CBO says the coverage expansion provisions in the Senate-passed bill would cost about $200 billion by 2019, and that cost would rise 8 percent every year thereafter.

    But even these estimates understate the true cost of Obamacare. The president’s plan, like the House and Senate bills, would extend generous new insurance subsidies to low- and moderate-wage workers getting insurance through the new “exchanges.” Workers in job-based plans would get no additional help. That means two workers with identical incomes would be treated very differently. Gene Steuerle of the Urban Institute has estimated that, in 2016, a worker with job-based coverage and a $60,000 income would get $4,500 less than someone with the same income but health insurance through the exchange. This kind of inequitable treatment would never last: one way or another, the entitlement would get extended to everyone in the targeted income range, sending the overall costs of the program soaring.

    The president started off last year by saying he wanted to “bend the cost-curve” even as he broadened coverage. But after a year of partisan political and legislative maneuvering, all that’s left is a massive entitlement expansion. The new costs would get piled on top of the unreformed and unaffordable entitlements already on the books. It’s a budgetary disaster in the making.

    Posted in Obamacare [slideshow_deploy]

    11 Responses to Health Reform That Breaks the Bank

    1. Tom Kennedy, M.D. says:

      With all the talk of what will/should be in the proposed health care reform legislation I want to take this opportunity suggest some concrete and effective solutions and to comment on the debate.

      The public option WILL result in:

      1- Higher Costs

      2- Lower quality

      3- Increased inefficiencies

      4- Increased discrepancy in accessibility of health care.

      5- Rationing to control costs.

      Real health care reform should be based on these ideals and goals:

      1- Health care is MOSTLY a states issue.

      2- We need to level the playing field to all when health care is concerned.

      3- Basic health care is not only a right, but a responsibility of the individual as well. Everyone should be responsible for carrying health care coverage. Individuals must be encouraged to adopt healthy lifestyles and to avoid unhealthy life choices. It is perfectly appropriate to charge increased rates to those who choose to smoke cigarettes, drink excessively, ride motorcycles, fly airplanes. skydive, or participate in other dangerous activities.

      4- Increase access.

      5- The costs must be controlled.

      -Cost of medications

      -Administrative costs

      -Costs of defensive medicine

      -The cost of providing care to those individuals in the country illegally.

      6- Provide choice.

      7- Provide a safety net for those who TRULY need it.

      8- Fix only what needs fixing and improve upon what works.

      9- Limit the role of government to protecting individuals who are TRULY in need.

      What needs to be included in reform of the health care delivery and payment system at the state level includes:

      1- Eliminate the unfairness of individualized risk pools. Individuals should be able to purchase insurance at the same rates made available to large employers for their employees. The risk pool should represent all individuals covered by a given insurer within the state. That would make insurance more affordable to small employers, self employed individuals, individuals changing jobs and individuals who become unemployed.

      2- As long as insurance companies are willing to follow the rules of each state, they should be encouraged to offer insurance across state lines.

      3- Preexisting conditions should be eliminated as a condition of determining eligibility when switching to a new insurance plan or when moving to a different state. Individuals who elect to go uninsured (until they acquire a need for health care) should not be made exempt from preexisting condition clauses, otherwise there is no incentive for "healthy individuals" to spend money for insurance until they perceive a need. The insignificant "penalties" alone are clearly inadequate to motivate healthy individuals to maintain continuous coverage.

      4- Insurance companies should be prevented from "dropping" coverage to individuals who become severely or chronically ill.

      5- Medical IRA's should be encouraged.

      6- Catastrophic coverage plans should be encouraged and individuals should be able to opt out of "Cadillac" plans. States should allow citizens to select various levels of coverage (ala carte).

      7- Individuals should always be required to cover some of the costs of health care (they MUST have some skin in the game) so that they are encouraged to shop for affordable and NECESSARY care. Free care will ALWAYS lead to over utilization of health care.

      8- The bureaucracy of health care must be streamlined. The involvement of government in health care is one of the main reasons we as Americans spend way too much of our health care on administrative costs rather than on the actual costs of medical evaluation and treatment! Government involvement in health care should be limited to insuring quality care is available to those who are vulnerable. Private health insurance options could be subsidized as a way of providing affordable coverage to those who truly are in need of assistance.

      9- We cannot afford to provide free care (other than in the case of emergencies) to those individuals who are in our country illegally.

      10- No reform plan should even be considered unless it includes comprehensive tort reform!

      11- Alternative forms of health care (chiropractic, naturopathic, acupuncture, massage therapy etc.) that do not show proven positive results (shortened duration or decrease in severity of symptoms, improvement in function, quicker return to work, etc.) should not be covered. Insurance companies should not be required to pay for unproven treatments and government plans should not pay for these treatments as well.

      12- Affordable plans appropriate for healthy young adults should be made available to encourage these individuals to obtain and maintain coverage.

      On the federal level health care reform (and involvement in the health care system) should be limited to:

      1- Comprehensive malpractice reform.

      2- Health care costs (including the cost of insurance) should be fully tax deductible to everyone or all employer provided insurance should be taxed as a benefit. Adopting the "Fair Tax" would be an even better approach to solving this issue of unfairness in the current system.

      3- Enact legislation to assist insurance companies to be able to offer health insurance across state lines.

      4- Reform Medicare:

      -Provide subsidies so individuals can acquire insurance from private insurance carriers rather than having to rely on the less cost efficient government insurance.

      5- Limit the role of government in health care for older individuals to providing assistance only to those in need (There is no reason government should provide health care coverage/assistance to multimillionaires.).

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    3. John B. says:

      Congressman Paul Ryan (R) Wisconsin has by my estimation made the single largest blow to the credibility of Obamacare, he is a HERO. Thank-You PAUL!!!

      Ryan has surgically dissected Obamacare with such accuracy we might consider Ryan for president 2012!

      Forgive me Mr. Ryan I do not want to paint a + target on your back.

      I think you have already accomplished that Sir!

      Mr. Ryan you my friend and fellow compatriot have courage conviction and most of all the intestinal fortitude to stand up to Washington D.C.!

      That is what is embodied in the objection most Americans hold as true Washington D.C. is out of touch and overbearing. You are delivering that message continue to do so.

      Please do not give up the ship Sir; we have your back, you can take that to the bank Sir

    4. Paul Terry Stone, Su says:

      Rep. Ryan and the other Republicans that attempted to do so objected to this bill with supportable facts and the Democrats supported this bill mostly with sob stories. To me, supportable facts show that government can't be all things to all people and that government actually does have its limits.

    5. Drew Page, IL says:

      Most of us will never get through life without our share of misfortune. Wars, crime, natural disasters, accidents and illnesses will claim lives and property of many people. Unemployment, divorce and domestic problems will test the mettle of many before their lives are over. These things are often called "unfair".

      While some believe that it is the duty of government to make all these bad things "go away", responsible adults know this isn't possible.

      Many of our parents and grandparents lived through the Great Depression, which lasted from 1929 to 1939. This was a period of time of great deprivation and despair for many, many people. Most people survived it, but it profoundly changed their attitudes towards life. These survivors became stronger for their ordeal. They learned that sitting on their rearend and complaining didn't put food on the table or heat in the house. They had to compete hard for a job and work even harder just to keep it if they could find one. They learned to adapt, to overcome, to scrimp and save and to do without. Strong people emerged from this crucible.

      I'm sure these people would have liked the government to make all these unpleasant things go away. But they realized that this was not going to happen and did what it took to survive.

      There is a lesson here for today's generation. The answer to your problems lies within yourselves, not with the government.

    6. Tim Az says:

      I guess no one has been paying attention the bank is already broke. All that's left is for America's creditors to deny us any more credit. It's just a matter of time before we go the way of Greece. Just maybe we can tighten our belts long enough to downsize our govt. and return to our former glory.

    7. Ben C. Ann Arbor, MI says:

      The above article reminds me of the movie Logan's Run where those reaching twenty nine years of age are eliminated from the planet. In this case those reaching retirement will be eliminated reducing the burden on government entitlement programs. I don't for one minute think Congress has our best interests at heart. Do I recall corretly Harry Reid stating that senior citizens will just have to live with their illnesses?

    8. Pingback: Morning Bell: Dead Legislation Walking | The Foundry: Conservative Policy News.

    9. Pingback: Morning Bell: Dead Legislation Walking | Fix Health Care Policy

    10. Linda, Dallas, Pa says:

      Breaking the bank is the whole point… Remember the famous words, "Never let a good crisis go to waste". Then google Cloward and Pivins, a theory / plan Obama taught as a Harvard Professor, and it all makes more sense.

      I just can't beleive there are that many left loons in the House and Senate that are falling for this! Unbelievable

    11. politicaljules tx says:

      We choose to have a Cadillac plan because of a child w/health issues. We scrape to pay for it because it is worth it. Unfortunately obamacare will tax us into poverty where we cannot pay for it anymore.

      My family’s (+disabled dtr) Health Care insurance premium per yr is $5200. Under obamacare our premium will increase $2080=$7360.

      Once the premiums necessarily skyrocket it will be more.

      Her monthly medical supplies will go from $700/mo to $980/mo just because the taxes.

      To all of you who voted for him and continue to support him, do you think our family can afford that? We cannot.

      To those of you who do not support BO, impeach him now.

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