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Health Reform Savings Myth

John on June 1, 2009 at 2:54 pm

The Washington Post, yesterday:

“Health-care reform is entitlement reform” has become a mantra of the Obama administration. The idea is that Congress can add a massive health-care program this year — covering the uninsured — and use the same measures that pay for the health reform to fix the broader budget problems. If that sounds too good to be true, there’s a reason.

Expanding insurance to cover the 46 million Americans who are uninsured would probably cost more than $100 billion a year — more than the federal government spends on education, training, employment and social services combined. It is an immense undertaking at a time when the budget is under terrible strain. So it’s no surprise that Democrats and the Obama administration do not want to portray it simply as another big entitlement program.

Some argue that universal coverage would decrease costs by expanding the risk pool (bringing healthy young people into the system) and by decreasing emergency room costs, because more people would get care before their illnesses become acute. There’s truth to both, but the savings are vastly outweighed by the costs of treating so many people who today get little or no care. Expanding insurance coverage would increase health-care spending by those who acquire insurance and add to overall health cost inflation.

Well, then, perhaps expanding coverage can be justified as the necessary “sweetener” in a package of tough measures to control costs? It’s true that Congress doesn’t much like all-pain-and-no-gain policies. But the administration’s proposal, even before Congress gets to work, is to spend $100 billion more on coverage while finding cost-saving measures worth only about a third as much. Another third would be paid for by tax increases. The last third, so far, isn’t paid for at all. That’s three times as much sweetener as medicine, in other words — and Congress will be tempted to jettison some of the savings and all of the tax increases.


Unfortunately, though many ideas are tossed around, no one really knows how to slow that cost growth. Health information technology, better disease management and preventive care are all good ideas that would almost certainly improve the quality of health care, but they are less certain to slow cost growth. In fact, the Congressional Budget Office has pointed out that each of these would either drive up government costs or have to be paired with other policy changes to create any federal savings.

That last part happens to be exactly the point of a video I made last week:

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The bottom line is that Obama and the Democrats are trying to sell Americans on the desperate need for reform and then present universal coverage via a new Medicare clone as the solution. In reality, Medicare is a huge part of what’s driving us bankrupt now. Let’s see the President succeed at reducing costs in the current government-run system before we even talk about tripling its size.

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Category: Health & Education |

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