NCPA - National Center for Policy Analysis


July 21, 2009

The Congressional Budget Office (CBO) delivered a couple of blows to President Obama's health care reform proposals last week.  Fear of the trillion dollar costs and at least $240 billion in increased deficits are chasing away even Democrats.  And that's not the worst of it.  The price tag is actually much higher than reported because many of the real costs are paid for by others, says the Washington Post.

For example:

  • The $219 billion of "savings" touted by House Democrats refers to hospital and doctors getting less for their services.
  • This is what the government already does with Medicaid and Medicare, which on average pay 30 percent less for procedures than private insurers.
  • In such instances, hospitals and doctors get less and/or the "savings" are translated into other patients paying more to cover the shortfall.
  • This can more accurately be referred to as "cost shifting," not "savings."

States are worrying about the fiscal impact of changes to the health care system.  Governors from across the political spectrum realize they will have to pick up a major part of the tab for these supposed cost savings.  In the Senate Finance Committee plan, the federal government would pay for the expanded Medicaid costs of the new health care benefits for possibly five years.  After that, the states would have to carry their normal Medicaid cost share of 43 percent.

Gov. Haley Barbour, Mississippi Republican, warned at the annual National Governors Association meeting on Sunday that the change to expand the Medicaid system, "would increase spending on Medicaid by 50 percent, and that's money we don't have.  And other states don't have it either." Democratic Gov. Phil Bredesen of Tennessee worried the program would be "the mother of all unfunded mandates."

Source: Editorial, "The Mother of Unfunded Mandates: Someone Has to Pay for Health Care 'Savings'," Washington Post, July 21, 2009.

For text:


Browse more articles on Health Issues