Skip to main content

Will Reform Act Slow Health Costs?

By June 10, 2010Commentary

The Administration and Congressional Democrats want Americans to believe that the recently passed health bill was a good idea and will reduce the deficit.  The polls show most people aren’t buying it and for good reason; the justification for the law was built on misleading and false data and assumptions.  A commentary in Health Affairs provides an excellent analysis of just how the bill will actually affect the deficit.  (Health Affairs Article) The authors begin by noting how truly staggering our deficit and debt problem is.  This year the federal government is spending 25% of GDP while only taking in 15%, hence a trillion dollar plus deficit.  According to the Congressional Budget Office’s own analysis, the deficit remains in the high hundreds of billions for the foreseeable future, meaning that almost a trillion dollars will be spent on interest on the debt alone in 2020.

The CBO’s final score of the reform act estimated a very slight deficit reduction effect of $124 billion over ten years, or around $12 billion a year, which is immaterial.  Despite a mammoth spending increase, deficit reduction supposedly will occur because of Medicare payment reductions and large tax and other revenue increases.  CBO was constrained in its analysis because of the way Congress categorized certain items.  The authors put forward a more realistic scenario, which results in a ten year increase in the deficit ranging from $550 billion to $1.45 trillion.

The deficit additions come from recognizing that many of the supposed savings are unachievable, that future amounts which must be authorized by Congress to operate the program were not included in the CBO analysis, that certain of the revenue items are not likely to be implemented as scheduled and that premiums for the CLASS program should be treated as reserved to pay benefits, not used for short-term deficit reduction as they are in the CBO analysis.  The consequences of our current deficits and debt can not be over-emphasized.  Failure to act immediately will mean severe economic and quality of life damage for Americans.  A good place to start is repealing the expanded access provisions of the reform bill until we figure out how to make the cost of coverage more affordable.  Massachusetts, Tennessee and other state coverage expansions are a lesson that should be heeded.

Leave a comment