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  • The Debt Commission and Obamacare

    The president’s debt commission had its first meeting this week, and all of the talk was of getting serious about putting our fiscal house in order, with everything “on the table” for consideration.

    There’s no arguing with the need to get serious. According to the Congressional Budget Office (CBO), if the Obama budget were adopted in full, just the interest on the national debt would exceed $900 billion in 2020 and consume one out of every five dollars in federal revenue. To put that in perspective, in 2007, before the financial crisis hit with full force, interest payments on debt stood at $237 billion, or just 9 percent of total tax collections. A sudden and steep rise in the percentage of governmental revenue dedicated to servicing past excess consumption is a clear warning sign to lenders and credit-rating agencies that a country’s finances are approaching the point of no return.

    Unfortunately, the timeline for taking corrective action may have shortened even in the past few weeks and days. What began as a slow-motion crumble of Greece’s economic house of cards is now threatening to become a serious global crisis. The flight from sovereign debt risk is now spreading to other vulnerable, highly leveraged countries, including Portugal, Ireland, and Spain. The implications for European economic recovery are ominous. And, if Europe’s economy slides backward again into a deep recession, no part of the global economy will be completely spared from the fallout, including the United States.

    So we are long past the point when national leaders should have been sitting down together to hammer out a budget framework to avert the crisis everyone could long see coming. Indeed, one might have thought it would be the first order of business for a newly elected president of the United States.

    But it wasn’t. Instead, Pres. Barack Obama decided to spend 2009 using unusually large Democratic majorities in the House and Senate to jam a partisan and highly polarizing health care bill through the Congress. No Republican supported the measure, in large part because it vastly expanded federal entitlement commitments at the very moment when it was abundantly clear that the existing entitlements are the problem.

    With the health legislation signed into law over the objections of a united Republican party, the president now wants Republicans to help him finance the newly enlarged welfare state.

    Of course, the commission itself is a transparent maneuver to pass the buck in an election year. Voters are beyond fed up with the massive spending spree taking place in Washington. To every hostile question Democratic candidates will get in coming months about the exploding national debt, they are therefore planning the following answer: We’re waiting for the commission to make its recommendations in December. Never mind that Democrats control the White House and Congress. If they wanted to cut the budget, they could certainly do so, starting right now. Instead, they will try to use the appointment of a non-binding commission to create the appearance of a proactive agenda.

    For the commission itself, the elephant in the room is Obamacare. Former senator Alan Simpson, the co-chair of the commission, says the president has agreed that even the health law is “on the table” for discussion.

    That’s good, if he means it. Because it is not possible to write a durable, bipartisan budget framework with health spending written entirely according to one party’s formulation.

    Health care remains the largest problem in the nation’s long-term budget outlook, even after enactment of the health bill. On paper, the bill makes massive cuts in Medicare. But all of the supposed savings would go toward standing up a new entitlement that costs even more than the savings. So, health entitlement spending expands under the legislation, not contracts.

    Moreover, the Medicare savings are from arbitrary payment-rate reductions. OMB director Peter Orszag continues to argue the health law lays the predicate for cost-control through painless efficiency improvement in the delivery of medical services. But that’s either a smokescreen or the most alarming kind of wishful thinking. The “delivery-system reforms” in the legislation are at best small pilot projects that will amount to very little. Certainly CBO assumed no savings from them. Neither did the chief actuary of the Medicare program.

    The real cuts in Medicare come from reductions in payment rates. The cuts apply to all providers, across the board. There’s no attempt to calibrate based on the quality of the patient care or performance. If the debt commission takes Obamacare as a given when looking for additional savings in health care, it will inevitably fall into the same trap. To find quick and “scoreable” savings (that is, savings that CBO will recognize), the easiest thing to do is to further ratchet down payment rates and pretend the cuts will solve the budget problem. Going down that road would be a disaster for the quality of American medicine and would not provide a lasting solution.

    What’s needed in American health care is a dynamic marketplace that drives up the productivity of those delivering medical services. That’s the only way to cut costs without harming quality. That’s genuine delivery system reform. Building such a marketplace requires, first and foremost, cost-conscious consumers, which in turn requires fundamental reform of the health entitlement programs and the tax treatment of health insurance. Fortunately, Congressman Paul Ryan’s roadmap has already shown us the way.

    Like it or not, the budget debate remains in large part a health-care debate. Obamacare settled nothing because it did not solve the health care cost problem. It papered it over with price controls.

    Cross-posted at National Review Online

    Posted in Obamacare [slideshow_deploy]

    6 Responses to The Debt Commission and Obamacare

    1. John Cothern says:

      Is $2.1 trillion a reliable cost for health care as cited by the government? What if this sum is merely the total of all escalated provider and over charges on large hospital invoices. Costs are not a factor, as actual invoices are negotiated settlements by insurance carriers and consumers. The balance remains uncollected debt, a probable write off for tax purposes, which hospitals enjoy so as to maintain a non-profit status according to tax law. A lot more transparency is truly required.

      Rough estimates indicate that health care consumers spend about $900B per year on premiums, another $150B on preventive care and deductibles. Estimate $400B for insurance carrier company burdens (overhead) and profit. Assuming the balance of $500B pays for all medically necessary (major medical) expenses by the carriers, then the balance of $1T must belong to Medicare recipients, and that’s a huge lump for seniors (about $80 per individual) or the government to bear.

      It would appear we have some severe accounting problems and issues that Sarbanes-Oxley does not address. “Accounting” may well be the reason we cannot project or contain any budgets whatsoever. Again – lack of transparency! Lack of truth as well!

    2. Drew Page, IL says:

      Heritage's use of figures coming from the CBO may not be the best source for making a case against fiscal irresponsibility. This is the same office that said Obama's health care bill would cost only $900 billion over ten years, comparing six years of benefits to ten years of funding. Unless we know why CBO includes and excludes from their forecasts, their pronouncements are meaningless.

      It doesn't take a "Debt Commission" to figure out how to deal with a growing national deficit. Socialism costs money, lots of money. As long as we have a government hell bent on socialism, open borders and amnesty for illegal aliens and putting it all on a credit card that someone else has to pay off, the debt will only get bigger and the taxes we will all be compelled to pay will only go up.

      We have only one option. We have to get rid of all these irresponsible, spend and tax politicians. The sooner the better.

    3. Lloyd Scallan - New says:

      This "Debt Commission" of Obama appointees, is in place for one reason. To give cover to Obama when our economical systems fails! Is anyone naive enough

      to really believe the commision's findings and/or reconmentdation will reflect anything other than exactly what their benefactor wants? Why will the findings not be made public until after the November elections? We had all better understand EVERYTHING Obama does is delibertly designed to futher his socialist agenda and the total "tranformation" of America.

    4. Jim Kinnu, Fountain says:

      You have one thing right – the Debt Study Commission is in existence for one major reason, to give the Democrats running in November "cover" during the election process for their inaction on reducing spending and the national debt!!!! What the Republicans should do right now is to put forth a well thought out action plan for reducing our National Debt and make it one of about 5 -10 major planks in their "New Contract wit America" if they are given a majority in either or both Houses of Congress in the 2010 Election. If they get a "veto proof" majority i nthe election then they can make it the law of the land instead of sitting on their hands and compaining!!!! They need to take "POSITIVE" action NOW!!!!!

    5. gary harston,Moweaqu says:

      the obama agenda is right track take no resposibilty if the commision says that taxes have to beraised in order to get the deficet down and he will say i didnt recomend to raise taxes the commision did and as usual voters will belive him and not realize he wants taxes raiused so he can grow more big government

    6. Jerry Bateman, Ovied says:

      ObamaCare will dismantle our health care delivery system in a very short time if we are not able to repeal it or tweak it significantly. Please note that our system is already experiencing a nurse and doctor shortage and as soon as the Medicare reimbursement levels are reduced, we will see even more doctors stop accepting Medicare. Also, many young people thinking of pursuing a career in health care are changing their minds, because they do not see their future monetary rewards making up for the investments of time and money that they will need to make before actually earning a living as nurses and doctors. Additionally, we have lots of senior citizens consuming health care these days and the "Baby Boomers", 76 million of them, will soon be turning age 65 and start using their Medicare benefits. If doctors decide not to accept Medicare reimbursements then where will the 65 and over crowd get their health care? In other words, the demand for health care is increasing dramatically while the supply of health care providers is waning. There is no doubt that our health care delivery system needs significant fine tuning, but not the overhaul that has been passed into law. This situation will not get better if ObamaCare continues to be the law of the land.

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