ObamaCare's DeficitsPresident Obama insists that his health reform legislation is "the most significant effort to reduce deficits since the Balanced Budget Act of 1993." Yet, at the end of March a Gallup poll found that a solid majority of Americans—61%—believe that it will increase federal deficits despite the White House's claims. If you're part of that majority, take a bow: ObamaCare hasn't even been implemented, and we're on the path for more deficit spending.
Sixty-one percent of Americans believe deficits will rise under the bill
May 3, 2010
On April 15, in a little noticed vote, Senate Democrats pushed previously scheduled Medicare fee cuts to June. That may sound technical and unimportant, but this undermines a major component of the ObamaCare cost reductions. The price of this short delay: $6.27 billion in new borrowing. That modest hit will rise steeply when Congress votes to delay the cut again; further delays are inevitable, if history is any guide.
Remember, ObamaCare is rich in new subsidies for the middle class combined with a significant expansion of Medicaid. The result is over $900 billion in new spending. ObamaCare is supposed to pay for itself with a mix of Medicare Advantage cuts, Medicare fee cuts and tax increases.
Since it's politically toxic to ration services the way European government-run systems do, the White House has counted on savings from rationing payments for services instead. But rationing by another name is still rationing. If Medicare fees are cut, doctors shift away from serving publicly insured patients. In practical terms, it's as if Congress passed a regulation to limit the number of doctors available to millions of Americans. Congress has faced this dilemma for years, and has done nothing to solve it—except postponed the cuts. For more than a decade, Washington politicians insisted Medicare fee cuts were financially necessary, right until they actually had to deliver on them.
And so, in 2009, health analysts (count me among them) mocked the idea that Medicare fee cuts would ever cover ObamaCare's increased spending. If Congress reversed most of its own Medicare fee cuts before, how could anyone spend a trillion dollars backed by more of the same fictional savings? Liberal pundits responded by denying the history. In March, New York Times columnist Paul Krugman told ABC News that "most Medicare cost-saving measures have in fact gone through as planned... So the history is actually on our side here."
Actually, it isn't. No Congress in recent years has been particularly effective about reining in Medicare costs. Congress reversed planned cuts in 1999. And 2004. And 2005. And 2006. And 2008. In fact, since 1997, when members of both parties agreed to automatic cuts if spending rose faster than population and economic growth, the program has been cut just once, in 2002.
And this Democratic Congress has been no more disciplined. Senate Democrats just passed the "emergency" reversal to protect health care services in a recession. It's the same argument House Speaker Nancy Pelosi used to justify her own successful campaign to reverse fee cuts scheduled for December 2009. If Democrats didn't want to restrain health costs during a recession, why did they just spend a year writing a plan to do exactly that?
For the record, it's not a complete disaster. Cutting physician fees is undesirable, undermining seniors' access to quality health care and cost shifting the government's thrift onto millions of privately insured Americans—a lose-lose situation.
The trouble isn't just that ObamaCare is financed by the promise of Medicare reimbursement cuts—it's the bipartisan attempt to control Medicare by controlling fees. There is a need not simply to rethink the sweeping commitments of the White House proposal, but America's financing of health care altogether. The basic problem: People covered by public programs (Medicare, Medicaid) and by private insurance pay just 12 cents of every health dollar directly. Until we address this economic mismatch, health costs will continue to rise year after year.
And then there is the larger problem of Americans having access to the best health care in the world but, paradoxically, becoming less healthy. America needs to reduce its surging demand for health care. Medicaid costs have soared—one study finds that almost half of new program costs are due to the consequences of so many being overweight. Regardless of whether you favor ObamaCare or not, the best way to avoid future health expenses is to keep people out of the health care system in the first place.
Ironically, for more than a year, Washington has been consumed by a debate that won't address either the 12 cent problem or our unhealthy lifestyles, leaving us with a fundamentally unreformed system and future deficits. No wonder Americans remain skeptical.
Dr. Gratzer, a physician, is a senior fellow at the Manhattan Institute.