Obamacare 10 years down the road

The CBO has given us a look at what the costs of Obama care would be in the out years, ten years on. And it is not a pretty picture.

In a July 26 letter, CBO director Douglas Elmendorf notes that the net costs of new spending will increase at more than 8% per year between 2019 and 2029, while new revenue would only grow at about 5%. “In sum,” he writes, “relative to current law, the proposal would probably generate substantial increases in federal budget deficits during the decade beyond the current 10-year budget window.” (The House bill has changed somewhat in the meantime, but not enough to alter these numbers much.)

Look at the table and you'll see that it would be a deep mistake to believe the rhetoric about how the Democrats' plan would do anything to lower health care costs.

Of course, entitlements passed by Congress never cost what originally predicted.

As for the spending, when has a new entitlement ever come in under budget? True, the 2003 prescription drug benefit has, but those surprise savings derived from the private insurance design and competition that Democrats opposed and now want to kill. The better model for ObamaCare is the original estimate for Medicare spending when it was passed in 1965, and what has happened since.

That year, Congressional actuaries (CBO wasn’t around then) expected Medicare to cost $3.1 billion in 1970. In 1969, that estimate was pushed to $5 billion, and it really came in at $6.8 billion. House Ways and Means analysts estimated in 1967 that Medicare would cost $12 billion in 1990. They were off by a factor of 10—actual spending was $110 billion—even as its benefits coverage failed to keep pace with standards in the private market. Medicare spending in the first nine months of this fiscal year is $314 billion and growing by 10%. Some of this historical error is due to 1970s-era inflation, as well as advancements in care and technology. But Democrats also clearly underestimated—or lowballed—the public’s appetite for “free” health care.

ObamaCare’s deficit hole will eventually have to be filled one way or another—along with Medicare’s unfunded liability of some $37 trillion. That means either reaching ever-deeper into middle-class pockets with taxes, probably with a European-style value-added tax that will depress economic growth. Or with the very restrictions on care and reimbursement that have been imposed on Medicare itself as costs exploded.

And at that point there will be only two choices: cutting benefits or raising taxes. And raising taxes only on millionaires won't be enough. Of course, by then, Obama will be out of office. Ten years on, everyone will be paying for what is being sold to us as a program that will actually save money.

Yeah, that's a likely a story. No wonder people aren't eager to buy it.