Conservative Principles Now

For the past several months, Washington has exhausted every possible method to pass a health care bill designed to increase government’s control over health care.  They haven’t been successful yet, but that may not matter: even without Obamacare, government health spending is set to increase far faster than private health expenditures, surpassing the private sector as soon as 2012.

Today the Centers for Medicare and Medicaid Services released its projections of national health expenditures for the next ten years.  The report shows that spending by the public sector grew much faster in 2009 at 8.7 percent, compared to the private sector which only grew at 3.0 percent.  Though public spending was heightened by the recession, as unemployment caused more Americans to lose employer-sponsored coverage and enroll in Medicaid, the trend is expected to continue into the next decade.

What is more, the report bases its projections on current law.  In the case of Medicare, this underestimates future spending.  Under current law, Medicare is set to reduce physician reimbursement rates by 21.3 percent in 2010.  This would lead to growth in Medicare spending of just 1.5 percent in 2010. However, the likelihood of these cuts coming to fruition is slim to none, as every year, Congress votes to suspend them.  2010 will likely be no different.  A report by Health Affairs cites that, if physician payment rates are held constant, the more likely growth in Medicare will be 5.1 percent in 2010.  Whether or not these physician cuts occur is no small matter—with them, overall health spending growth would be 3.9 percent.  Under the more likely scenario, health spending growth would be 4.7 percent.

Thus far, the debate on health care reform has focused on increasing government spending to reduce the number of uninsured.  But government spending should be moving in the opposite direction.  With government spending growing at a fast clip, rather than overhaul the entire system, lawmakers should channel reform towards high-cost (and largely cost-inefficient) government programs, like Medicare and Medicaid.

Medicare, Medicaid, and Social Security, the three entitlements big spenders, are duly in need of attention from Congress.  These programs will be responsible for unsustainable growth in government spending in the years to come, and will quickly become insolvent.  By reforming entitlement programs, Congress could kill two birds with one stone: achieve long sought-after health care reform and bend the cost curve in health care spending, all the while addressing the fiscal crisis facing the nation due to out-of-control spending.

Rather than increase government’s role in the health care system, Congress should see the current trend for what it is: a cry for reform of existing government health care programs.  Getting public health spending under control would have a monumental effect on overall spending, directly and indirectly reducing costs for all Americans.

President Barack Obama again asserted today that his health care plan would be deficit neutral chiding: “The argument that opponents are making against this bill does not hold water.”

But while the President’s most ardent supporters are trying to explain to each other why the benefits of the bill do not start until 2014, they are openly admitting that Obama’s deficit busting claims are complete fiction:

The Washington Post’s Ezra Klein: “The delay is a budget trick, an attempt to lower the 10-year cost of the bill at the expense of the very people we’re trying to help.”

Mother Jones‘ Kevin Drum: “I’m pretty sure the 2014 date is mostly due to budget finagling. This stuff can’t be done overnight, but I’ll bet most of it could be implemented within 12 months, and it could certainly be implemented within 24.”

Talking Points Memo’s Josh Marshall: “My impression is that some of the delays are there because it makes the budgetary accounting work better in terms of deficit neutrality. And I know the Dems would likely lose critical support without being able to show that the overall bill actually lowers the deficit. But if that’s the main reason, I suspect the legislative authors may be too clever by half since they may be slitting the bill’s and perhaps their own throats in the process.”

The conveniently shifted budget window of the bill’s spending benefits is just the tip of the iceberg when it comes to Obamacare’s deficit spending chicanery. Heritage’s health care team reports:

The Costly “Doctor Fix.” Every year, because of congressionally created formulas in Medicare physician payment, Congress must vote to suspend these pre-ordained payment systems that would automatically cut Medicare payments to physicians. If enacted this year, these cuts would reduce physician payment rates by 21 percent.

Physicians believe, correctly, that unless there is a fundamental reform of Medicare payment, many physicians will reduce their Medicare practice or stop seeing new Medicare patients, thereby reducing the accessibility of Medicare beneficiaries to physician care. Both the House and the Senate have acknowledged this as part of their agendas for health care reform.

However, to make their bills appear less costly, the leadership of both houses has removed the doctor fix and its more than $200 billion price tag from their health care bills and presented it as a separate bill. This enables Senator Reid to claim that his bill will reduce the deficit, but the CBO estimates that the House bill (H.R. 3961), combined with the “doctor fix” bill (H.R. 3962), would “add $89 billion to budget deficits over the 2010-2019 period.” The Senate bill plays the same shell game, creating the appearance of deficit reduction by ignoring the inevitable cost of the doctor fix.

The True Costs of the CLASS Act. The Senate bill, like the House bill, includes the Community Living Assistance Services and Supports (CLASS) Act, which would create a new government health care program for long-term health insurance. This provision creates a national insurance trust that would provide benefits for seniors and the disabled by creating a payment update in Medicare for skilled nursing facilities and home health care providers.

The CLASS Act is intended to pay for itself with collected premiums. The premiums would produce positive revenues for the government for the first 10 years, appearing to reduce the federal deficit during this time. However, as the CBO points out, while “the program’s cash flows would show net receipts for a number of years, [this would be] followed by net outlays in subsequent decades.” Thus, the CLASS Act appears self-sufficient for the first 10 years but starts running a deficit soon thereafter.
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Unreliable Medicare Cuts. The Senate bill depends on cutting Medicare to pay for its $1.2 trillion coverage expansion. Concerning the impact on Medicare enrollees, as CBO Director Doug Elemendorf explained, the bill would require a substantial reduction in the future growth of per capita beneficiary spending over the next 20 years compared to the previous 20 years.

Proponents of the Senate legislation claim that Medicare spending reductions would result in higher efficiencies. But as James C. Capretta, a Fellow at the Ethics and Public Policy Center, argues, “despite all of the talk of ‘delivery system reform,’ the Senate Democratic plan would not transform American medicine to make it more efficient.”[16] The dramatic savings depend on conventional Medicare provider cuts, not on meaningful Medicare reform. Furthermore, as demonstrated by the ongoing effort to correct the Medicare physician payment formula, it is unlikely that Congress would allow such deep cuts to occur in Medicare.

Moreover, these Medicare cuts include more than $100 billion in “savings” from changes in Medicare Advantage plans, a move that would directly affect the benefits of millions of seniors. In his analysis of the Senate bill, Foster confirmed that these changes would result in “less generous packages” and that enrollment “would decrease by about 33 percent.”