Monday, December 14, 2009

The cost-cutting myth of the Democrats' plans on health care

The Democrats have been claiming that their health care reforms would save money, but it's all bogus. Remember when the Republicans had proposed a cut in the increase in Medicare in the 1990s and the Democrats slammed them for making cuts in health care and never explained that it was merely cuts in the rate of growth? Well, as Robert Samuelson explains, that's part of the Democrats' plan today.
In 2009, national health spending will total an estimated $2.5 trillion, or 17.7 percent of gross domestic product. By 2019, it's projected to rise to $4.67 trillion under present policies, or 22.1 percent of GDP. With CAP's [Center for American Progress] "savings," it rises a little less sharply to $4.49 trillion, or 21.3 percent of GDP, according to Harvard economist David Cutler, the study's co-author who provided these figures. Similarly, family health insurance premiums rise from 19 percent of median family income in 2009 to 25 percent in 2019 under present policies and 23 percent with CAP's "savings."
Even such a cut in the rate of growth, government spending on health care will still be out of control.
The point is simple: Even with highly optimistic assumptions, health spending remains out of control. It absorbs more of government, business and family budgets. Higher health spending would put pressure on future budget deficits, already projected to total about $9 trillion over the next decade. If new taxes and Medicare "savings" are real, they could be used exclusively to pay down deficits, not finance new spending.

But many may not be real. Writing in The Wall Street Journal, Dr. Jeffrey Flier, dean of the Harvard Medical School, gave the various health bills a "failing grade" and said they wouldn't "control the growth of costs or raise the quality of care." Quoted in Newsweek, Dr. Delos Cosgrove, head of the Cleveland Clinic, said much the same. Richard Foster, the chief actuary of the federal Centers for Medicare & Medicaid Services, doubts the cost-saving provisions touted by CAP would save much money. He's also skeptical that Congress, facing complaints from hospitals and a squeeze on services, would allow all the Medicare reimbursement cuts to take effect. True, Congress has permitted some reimbursement reductions to occur but has repeatedly blocked the Sustainable Growth Rate adjustment for doctors, which most resembles the new proposals.

Health cost increases might spontaneously recede, but history suggests skepticism. The relentless advances reflect an open-ended insurance and delivery system that gives neither patients nor providers any reason to restrain spending. To attack costs first would be politically challenging. It would require admitting that all good things are not possible simultaneously and that the uninsured already receive much medical care. It would require genuine bipartisanship, not just a scramble for a few Republican votes. And it would require stronger measures to dismantle a fee-for-service delivery system that now rewards more, not better, care. That's a demanding and realistic approach; Obama's is wishful thinking.
The Democrats still want to claim that they can deal more federal health care for more people while still cutting costs. Sure. As if the federal government ever saved money on any of their massive programs.

If there are such available savings in Medicare that Congress is willing to vote for, let's see them do it now. Then, after we've seen the savings we can think about taking on such a massive expansion. We'll be waiting a long time, since they'll never vote for the type of savings that are truly necessary to make.

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