NCPA - National Center for Policy Analysis


January 2, 2009

Democrats are gearing up for a new run at heath care next year, which is another way of saying that it's an arms race to promise the most while disguising the costs, says the Wall Street Journal.  Obama's budget director, Peter Orszag was the former head of the Congressional Budget Office (CBO), and his useful work there on the unchecked growth of U.S. health spending, especially entitlements, ought to put the cost issue at the center of the 2009 debate.

According to CBO reports:

  • Government spending on Medicare and Medicaid is expected to rise to 6 percent of Gross Domestic Product in a decade, from 4.2 percent of GDP today.
  • In dollars, this amounts to $1.4 trillion -- nearly 30 percent of the entire federal budget.
  • If costs grow on pace, U.S. medical spending will rise to 25 percent of GDP in 2025, from 17 percent today.

Adding to this looming catastrophe are plans in Congress to:

  • Expand the insurance program for children, which will cost an extra $80 billion over the next 10 years.
  • Prevent automatic cuts in Medicare reimbursement fees to physicians at a cost of $556 billion.

But those are nothing compared to the centerpiece of the universal health care agenda:  a "public option" to provide government insurance for Americans of all ages and incomes.

  • In one scenario, CBO finds that allowing the nonpoor to buy into Medicaid would cost $7.8 billion over the next decade.
  • If that sounds like pocket change, keep in mind that Democrats want to make both the public option and private insurance less expensive for beneficiaries by transferring extra costs to the government, which would cost an estimated $752 billion.

CBO also finds that programs designed to trim costs, such as health information technology or comparative effectiveness research, will produce only modest savings.

Source:  Editorial, "Orszag's Health Warning," Wall Street Journal, December 29. 2008.

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