Turning the Clock Back Isn’t Enough: The Nasty Surprise Awaiting the GOP...

Turning the Clock Back Isn’t Enough: The Nasty Surprise Awaiting the GOP on Health Care and the Deficit

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The Republicans who will take control of the House this January have made it clear there are two things they hate: deficits and President Obama’s healthcare reform. They’ve promised to reduce the first and repeal (or at least hobble) the second. But if you’re worried about deficits, repealing the Obama plan won’t do any good unless you’ve got a better idea. In fact, the numbers say repealing it could make the government’s budget problems worse.

Despite the outrage over spending on the Wall Street bailout, the stimulus or the Iraq war, at least these costs are temporary.  But the combination of an aging population and health costs that keep rising faster than inflation means that spending on Medicare, Medicaid and Social Security are going up – – and they’ll keep going up for years on end. With an aging population, there will be more older people eligible for these programs. The health care they need will cost more on top of it.

When people argue about the costs of an aging America, they often lump Social Security and Medicare together like they were the identical twins of public policy.  If they are twins, they’re more like the 1980s movie Twins, featuring Arnold Schwarzenegger and Danny DeVito as the world’s most improbable pair of brothers. Maybe you remember the iconic movie poster. It shows the two dressed alike, but with an enormous Schwarzenegger looming over DeVito.  In the budget world, Medicare and Social Security are both problems, but Medicare is definitely played by Arnold. Here’s why.

Health care spending has been rising faster than the inflation rate for decades. In 2007, the Consumer Price Index went up 2.8 percent, and health spending went up 6 percent. In 1997 inflation went up 2.3 percent, and health spending went up 5.4 percent.  In 1990, when inflation was 5.4 percent, health spending climbed nearly 11 percent.

That’s why Medicare is the real budget buster. The Government Accountability Office likes to explain the budget problem by talking about the $56 trillion in “unfunded liabilities,” the country faces over the next few decades, commitments the government has made to provide Social Security and Medicare for people paying into these programs now.  About $34 trillion of that is Medicare alone.

That’s a mind-boggling number. You could throw out the $700 billion Wall Street bailout, the $787 billion stimulus package, the more than $1 trillion spent on Iraq and Afghanistan, even the $4 trillion the government will take in if we let the Bush tax cuts expire, and in the long term, we’ll still be in trouble if Medicare stays as it is now.

That means – and so few people in politics will say it flat out –that the government will go broke if it doesn’t either change Medicare or the broader health care system to control costs.  That was true before the Obama plan was ever passed.

And after? Yes, the Obama plan costs more than $800 billion over the next decade to expand coverage and implement other changes. But the nonpartisan Congressional Budget Office says because the plan reduces Medicare spending, it will trim the deficit slightly over the next decade ($143 billion by 2019) and by $1 trillion or more after that. Plus, the Medicare trustees say the changes in the bill extend the life of Medicare’s trust fund by 12 years, to 2029, which is significant.

How can that be? Well, the Obama plan cuts what Medicare pays to doctors and hospitals down the line, raises some fees and taxes, and pays for research on ways to provide health care more cost-effectively.   The projections depend on Congress following through on these changes planned in the law. If it doesn’t, there obviously won’t be any savings. What’s more, the projections assume the law actually succeeds in making the health care system more efficient, such as through new research into the best ways of providing care. If that doesn’t work – – and critics, including Medicare’s own actuary, are skeptical – – Medicare will cost more than projected.

So if we just repeal the Obama plan, and don’t find another way to cut Medicare’s costs, we’re back where we started: on our way to national bankruptcy. The same is true if Republicans go through with their plan to block the various provisions in the law.  Given the way Washington often works, it would be easy – – all too easy – – for Congress to jettison the unpopular cost-cutting provisions of the Obama plan and keep the expensive (but more popular) parts that will expand and improve coverage.

In today’s hyperpartisan political climate, too many people believe it’s enough to block the other guy’s plan.  That counts as a victory. But the truth is the status quo is not an option.  And it’s not at all clear that the Republican ideas on health care, such as a voucher system for Medicare or eliminating the tax breaks to employers to provide insurance, are going to be any more popular with the public than the Democratic plan or do any more to reduce costs. The Republicans have mostly ridden the wave of “not this.” They haven’t done the hard work of preparing the public for “what now?” But “what now” on health care is the question that really matters on the budget. If we don’t answer it, a lot of the other ideas might turn out to be Band-Aids.

Scott Bittle, author of “Where Does the Money Go? Rev Ed: Your Guided Tour to the Federal Budget Crisis,” is the executive editor of Public Agenda Online and has won two Golden Quill awards for feature articles and was honored by the Philadelphia Press Association for daily newspaper writing.

Jean Johnson, co-author of “Where Does the Money Go? Rev Ed: Your Guided Tour to the Federal Budget Crisis,” is the Executive Vice President of Public Agenda, Jean Johnson has more then 20 years of experience understanding public attitudes on a broad range of issues. She has also written for various publications such as USA Today, Education Week, and the National Institute of Justice Journal.

For more information please visit  PublicAgenda.org and follow the authors on Facebook and Twitter.

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23 Comments on "Turning the Clock Back Isn’t Enough: The Nasty Surprise Awaiting the GOP on Health Care and the Deficit"


Guest
tcoyote
Jan 4, 2011

Agree w/ comment about Republicans not having a replacement. Difficult to accept that repealing ACA makes deficit worse. NO-ONE except administration propagandists and some left wing bloggers believed this plan would actually reduce the deficit.
The CBO’s deficit scoring was phony in the sense that it assumed Congress would summon the courage to actually cut Medicare spending. (They did a hell of a job with the SGR physician fee reductions!). It also had a lot of junk in it, like crediting an as yet non-existent Independent Payment Commission with saving money from yet specified changes in the program, or “free” preventive care as reducing future spending. The biggest “deficit reducer” in ACA was the big package of job killing tax increases. . .
ACA would only extend the life of the Medicare Trust Fund IF you kept the money saved from reducing provider payments, as opposed to spending it on the coverage expansions. CBO and the Medicare Trustees rolled over for the administration by producing these convenient benign findings. There is no way you can dress up a huge entitlement expansion as deficit reduction without lying to yourself and the public.
If you rolled back the coverage expansions but kept the Medicare provider payment reductions in ACA, you’d actually make a fair dent in the deficit. If the Republicans do not succeed in repealing ACA, the only way they can reduce the deficit is to make further reductions in Medicare provider payments or make the program more progressive by reducing the programs’ subsidies to wealthy beneficiaries.
The Repubs not only campaigned against the Medicare cuts in ACA, but against the tax increases as well. So lotsa luck, Republicans. . .

Guest
steve
Jan 4, 2011

@tcoyote- The CBO explicitly stated that they did not include much, if any, projected savings from the items like the IPAB and CER as those are too difficult to predict.
As to the broader topic, Don Taylor said it pretty well.
“Now is their chance to prove me wrong: they control the House of Representatives, and all the committees. They need to move beyond slogans and sound bites and write a bill. If it is so simple to address costs and 50 Million uninsured persons, the bill will be short and everyone can read it and get to know it well. Then have hearings on their bill. Mark it in a committee(s). Have the CBO score the bill. Let the country talk about it, and how it compares to the ACA. Debate the best way forward. And then put it to a vote in the full House of Representatives. The Republicans not only owe specificity to the country, they owe it to themselves if they want to be taken seriously on matters of health policy.”
http://donaldhtaylorjr.blogspot.com/2011/01/it-is-good-to-revisit-health-reform.html
Steve

Guest
rbar
Jan 4, 2011

“Now is their chance to prove me wrong” – IMHO, that’s akin to performing CPR on a decomposing body and hoping for improvement. The republicans have proven in the ACA debate that all they aspire to is political gain. The only intellectually honest right wing alternative is high deductible insurance and HC savings accounts – but it doesn’t poll well and the right wing is well aware of that. What remains are smear and obstruction. Not that I am an ACA fan, but it’s better than nothing.

Guest
Frank
Jan 4, 2011

That steaming piece of fiscal PORK / socialist BS is going to get the ADULT review it was supposed to get.
If OWEbama the MESS-iah and Welfare Queen Pelosi can’t deal with that — they should quit. They’re not needed.

Guest
Jan 4, 2011

Frank The Anonymous Troll, your repetitive ad hominem posts here are anything BUT “adult.” Your banal characterizations of political leaders you don’t like could not be more juvenile or tiresome. Yahoo boards quality.
Don Taylor’s observations is right on the money, too.

Guest
MG
Jan 4, 2011

They will cut the discretionary budget and leave Medicare/SSI alone. Tea Partiers who propelled the GOP and came out in large numbers this fall are gray and grayer for the most part. Pity the politician who even mentions Medicare cuts or tries to defend Obamacare to seniors. In PA, the seniors came out in huge numbers and voted primarily on healthcare and the perceived cuts.
Hell, the irony is that a guy like Pat Toomey (former president of the Club for Growth and a minion of Grover Norquist who wants to slash every gov’t program that isn’t defense-related) ran a series of ads this fall that attacked Sestak’s vote on Obamacare because IT SLASHED MEDICARE. It worked.
Sestak got walloped among seniors in PA. Seniors didn’t really care about the deficit. What they cared about was the perceived and future potential Medicare cuts. Never mind that the donuthole in Medicare Part D was addressed through aggressive rebating on most brand drugs. Irrelevant. Or that Medicare MMA Act of 2003 gave them drug benefits and was the biggest unfunded gov’t program in the last 40 years. 200x what? Obamacare takes subsidies away from Medicare Advantage which was a huge issue in PA.
Frankly only does Medicare need to be addressed but healthcare inflation costs are beginning to really crush local and state municipality budgets which are starting to have to support large numbers of retired beneficiaries. Everyone yells about the job security and salaries of public sector employees. Those aren’t the issues generally.
It is the retiree benefits especially healthcare that is in many cases either almost free or very heavily subsidized. It can’t continue. Question is how local/state municipalities that are essentially bankrupt will begin to deal with this because their hands will be forced much sooner than the federal gov’t. In many cases though, they can’t declare bankruptcy or it is very difficult.

Guest
Jim Bertsch
Jan 5, 2011

Health care costs will continue to rise at rates beyond ordinary inflation. It is in the direct interest of the entire Health Care Industry. Vendors of health care, so-called insurance companies, brazenly and actively collude to control and manipulate the health care marketplace.
They act as a monopoly to drive up health care costs, which increases revenues. These vendors design products that maximize profits, while pushing unprofitable products onto Medicare/Medicaid.
Until Congress repeals the legal right for health care vendors to collude, manipulate and control the health care market place, costs to Medicaire/Medicaid programs will be driven by the Health Care Vendors.
Create a free-market in Health Care and you will drive down health care costs. It will punch a hole in the economic bubble caused by health care and avert the path to USA Gov’t bankruptcy we are now walking.

Guest
Jim Bertsch
Jan 5, 2011

Health care costs will continue to rise at rates beyond ordinary inflation. It is in the direct interest of the entire Health Care Industry. Vendors of health care, so-called insurance companies, brazenly and actively collude to control and manipulate the health care marketplace.
They act as a monopoly to drive up health care costs, which increases revenues. These vendors design products that maximize profits, while pushing unprofitable products onto Medicare/Medicaid.
Until Congress repeals the legal right for health care vendors to collude, manipulate and control the health care market place, costs to Medicare/Medicaid programs will be driven by the Health Care Vendors.
Create a free-market in Health Care and you will drive down health care costs. It will punch a hole in the economic bubble caused by health care and avert the path to USA Gov’t bankruptcy we are now walking.

Guest
nate
Jan 5, 2011

Steve like this bill that the Unions and Democrats blocked for 10+ years? Simple, proven, and doesn’t require government spending, no wonder they opposed it.
“Senate Majority Leader Bill Frist (R-Tenn.) this month hopes to hold a floor vote on a revised version of a bill (S 1995) that would allow small businesses and trade associations to form association health plans across state lines,”
” The only intellectually honest right wing alternative”
or the only one rbar heard with his head buried up his…. AHPs? Vouchers? Actually address fraud? If you had any exposure to right wing dicussion instead of just listening to liberal attacks on right wing thougt you would know it goes much deeper.
H.R.3356 – Medicare Beneficiary Freedom to Choose Act of 2009
To amend title XVIII of the Social Security Act to clarify the use of private contracts by Medicare beneficiaries for professional services and to allow individuals to choose to opt out of the Medicare part A benefits.

Guest
nate
Jan 5, 2011

Allowing people with the means to opt out of Medicare would reduce Medicare’s liabilities, those people aren’t asking for their taxes back they just don’t want forced to be in the system. Its a no lose sitution for the public and the bankrupt trust fund to allow these people to leave but liberals are scared to death of people knowing their is an option to government nannyism. How people like rbar and steve are ignorant of these bills and discussions yet rant away is beyound me.
http://www.libertarian-logic.com/people-declined-social-security-benefits.html
Why would not feeding at the medicare troth cost me my SS benefits? What does one have to do with the other? Heavy handed liberal coercion

Guest
nate
Jan 6, 2011

“What remains are smear and obstruction. Not that I am an ACA fan, but it’s better than nothing.”
Wanted to point out one more time the Hypocrisy of rbar and liberals in general. Its well known that Pelosi blocked all republican legislation, she didn’t let anything move forward. Knowing this, hypocrits like rbar then want to claim its the republicans that obstructed things. You had a majority in the house and 60 votes in the senate, how did republicans obstruct anything? The only question is are they being dishonest or just that politically ignornt they only know what MSNBC feeds them?

Guest
Frank
Jan 6, 2011

BobbyG The Anonymous Troll, your repetitive ad hominem posts here are anything BUT “adult.” Your banal characterizations of political leaders you don’t like could not be more juvenile or tiresome. Yahoo boards quality.

Guest
Jan 6, 2011

@Frank –
Is that ALL you got? YOU are the anonymous one here. I am entirely traceable. And, your adolescent negative potshot monikers directed at the President and others adds zero to any constructive debate here. You are a waste of bandwidth.

Guest
steve
Jan 6, 2011

@nate- I think you, at least partially, judge sincerity by a group’s willingness to expend political capital. The Republicans have not been willing to spend 13 months to pass a health reform bill. I would note that they were willing to use reconciliation to pass tax cuts.
The crossing state lines claim remains unproven as far as I am concerned. The issue is not selling across state lines. Companies can do that now. The issue is the state mandates. The state mandates need to be repealed so that cheaper products can be offered. For some reason the right does not want to take on this issue directly.
Steve

Guest
nate
Jan 6, 2011

“The Republicans have not been willing to spend 13 months to pass a health reform bill.”
What do you mean by this? Are you saying Republicans are bad becuase they refused to blindly agree to a liberal bill they don’t think would work? Republicans were willing to pass a bill but Pelosi and Reed refused to allow them to make any amendments or have any say. Except for adding their name to a terrible bill what did you want them to do? It wasn’t the Republicans blocking debate and ideas, it was Liberals ramming their version down everyone’s throat without anyone else having any say in it at all. This is all clearly documented.
No comoanies can not sell across state lines. They can get approval in each state independent of any other state and once licensed by a particular state are subject to those State’s mandates. The way to circumvent bad state mandates us to sell a policy from another juristiction in that state, thus the term sell across state lines.
“For some reason the right does not want to take on this issue directly.”
Again another BS argument that is completly not true. How does “the Right” take on State Mandates in Massuchusetts? Your argument doesn’t make any sense unless you have a complete misunderstanding of how things work.