Saturday, December 12, 2009

Health Care Overhaul Still More Expensive Than If No Changes Made

The President and Congressional Democrats are still pushing hard to overhaul the health care delivery system without regard to costs - whether it is the 10-year timeframe that they love to trot out or over a longer time period.

Democrats have played all manner of accounting tricks in order to attempt to claim that their proposal is revenue neutral over a 10 year period. They performed these accounting tricks in plain sight.

If the tax system is adjusted and revenues increase before changes are made to how those revenues are spent; the difference builds a balance so that an accounting trick is performed in plain sight. Democrats are busy trying to claim a balanced budget over the span of 10 years by providing tax revenues for the entire 10 year period while expending those revenues over the condensed 7 year period.

This has to do with the phase in of the health care changes proffered under the various plans while the tax changes would come ahead of the health care changes.

The deficits accelerate the further away from passage you get; and the CBO notes that the costs will outstrip revenues in short order. That means that deficits are inevitable under the proposals.

The Economist found pretty much the same thing.

Now, yet another nonpartisan group has slammed the bills working their way through Congress, finding that it would cost more over the 10-year period than if nothing were done.

The sad fact is that the only way that the Democrats' proposals manage to be fiscally responsible (and I'm using that term loosely) is if you take 10 years worth of revenue to pay for seven years of expenditures on health care. That means that once you've blown through the reserves, the costs will explode in the years following the 10-year plan.

The Senate cost estimate contains lots of bad news, and wishful thinking on the good news.
The bad news: Overall, according to the estimate, we'll be spending more on health care come 2019 than we would if we did nothing.

The not-so-bad news: The difference is tiny, in relative terms, and even smaller than it was for the House bill, which was hardly big.

The good news: The underlying trend is in the right direction. As more time passes, it's more likely we'll save money.

Why do I say that? It has to do with two competing trends that explain how the Medicare Actuary arrives at its bottom line.

Dramatically expanding and strengthening health insurance leads to higher overall health spending, primarily because people who have good health insurance tend to use more health care than people who don't. And--please, please remember--mostly this is a good thing. The primary reason uninsured and under-insured people get less health care is that they can't afford it.
The wishful thinking is that as time passes we're going to save money. That assumption has not been proven with current federal health care programs, yet we're to believe that these changes are going to result in mysterious savings down the road all while acknowledging that the expansion of health care insurance will necessitate that spending will increase by people who suddenly have insurance access.

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