NCPA - National Center for Policy Analysis

Health Care Reform Isn't Entitlement Reform

April 27, 2012

In February 2009, as the Obama administration was beginning to make its pitch for a major health care overhaul, then-White House budget director Peter Orszag said, "The path of fiscal responsibility [and entitlement reform] must run directly through health care."  A little more than a year later, the law that would become known as ObamaCare passed, says Peter Suderman, a senior editor at Reason Magazine.

So how is Medicare, the nation's biggest health care entitlement, doing now?  Not so well.

  • Two years after the passage of the Patient Protection and Affordable Care Act (PPACA), the program's trustees are reporting that the seniors' health program is on a glide path to insolvency -- perhaps by as soon as 2016.
  • The technocratic reforms that were supposed to remake the program aren't working nearly as well as hoped, and there are already signs that the Medicare spending reductions called for by the health care law will be delayed or undercut just as many critics warned.

In addition, the latest report from the program's trustees paints a bleak picture.

  • By 2024, current projections indicate, the trust fund will be empty, and the program, relying solely on existing revenues, will be unable to pay all of its bills.
  • In its first year of insolvency, the program will be able to finance just 87 percent of its obligations, a percentage that will decline further over time.

All this assumes that the law's Medicare savings will actually pay off.  Yet that is no sure thing either.  Those projected savings are based in large part on targeted payment cuts to health industry players and providers.  Those cuts, however, are already facing heavy opposition, and the White House has already backed down at least once.

The Obama administration gave us health care reform.  But America's entitlement system is now more in need of real reform than ever before.

Source: Peter Suderman, "Health Care Reform Isn't Entitlement Reform," Reason Magazine, April 25, 2012.

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