A Cure Worse than the Disease

With Democratic support coalescing around Sen. Max Baucus’s (D-Mont.) health care reform proposal, passage of a comprehensive overhaul now appears more likely than ever. One reason is the Congressional Budget Office’s (CBO) preliminary cost estimate for the bill suggesting that it would cost $829 billion over the 10-year budget window, but actually reduce the federal deficit by $81 billion.

On paper, the plan looks affordable, because it contains several features intended to reduce long-term health care costs. However, there is good reason to believe these proposals will not cut costs substantially, and could reduce the quality of care for patients. Most of the alleged cost-cutting measures merely shift costs from the federal government onto the states or private payers, without affecting long-term health care inflation. The only measures that could reduce the annual rate of growth in health care costs would erect government barriers between patients and their doctors, while jeopardizing long-term medical innovation.

Bringing millions of currently uninsured Americans into public or private health plans will not be cheap. That is why White House Chief of Staff Rahm Emanuel has said that the administration’s first priority is “getting health care costs under control.” And, in an August New York Times op-ed, President Obama wrote that the Democratic proposals “will finally bring skyrocketing health-care costs under control” by cutting “hundreds of billions of dollars in waste and inefficiency in federal health programs like Medicare and Medicaid.”

In order to keep the bill’s reported net costs down, Sen. Baucus’s plan relies on $397 billion of new taxes and other expected revenue and on accounting and cost-shifting gimmicks. For example, to help increase health care coverage, the bill would expand Medicaid eligibility, a move that shifts an estimated $33 billion of spending to the states. The CBO’s analysis notes this, but because it is not a federal expenditure, does not account for it in the bill’s budget score.