House bill


The Presidentís Reckless and False Health Care Claim

It’s now a clear pattern. When the president senses his position is vulnerable to a factual criticism, he asserts emphatically that the opposite is true — without ever providing evidence to back up his claim.

Here’s the latest example. According to Politico, President Obama told skeptical Blue Dog Democrats last evening that they should support the health care bill emerging in the House because it would produce savings beyond the ten-year budget window.

Oh really. Says who?

The context here is crucial. It’s already abundantly clear that the federal government cannot afford its existing health care commitments. The Congressional Budget Office (CBO) recently projected that Medicare and Medicaid costs will nearly double in twenty-five years, from 5.3 percent of GDP today to 10.0 percent in 2035 (this assumes continuation of current policy with regard to physician fee updates). The Medicare Trustees projected in May that the program’s 75-year unfunded liability has reached $36 trillion.

Moreover, the federal government is projected to run massive budget deficits for the foreseeable future. In 2009, the government has already run up a deficit of $1 trillion through June, and it could reach $2 trillion before it’s over at the end of September. CBO expects the Obama budget plan would increase the government’s debt by $11 trillion from the end of 2008 to the end of 2019. Running up government debt at that kind of pace would put the nation’s economy at considerable risk, to put it mildly. At some point, lenders would demand higher returns for their lending, pushing interest rates up and choking off growth, or the Fed would partially monetize the debt with even easier money and rapid inflation.

It is in this context that Democratic leaders in the House and Senate are trying to rush health care bills to their respective floors for consideration before the August congressional break.

The centerpieces of the bills are the creation of a new, massive entitlement to health insurance subsidization and a large expansion in Medicaid eligibility. The House bill, unveiled today and available here, would add $1.2 trillion in federal costs over a decade with just these two expansions, according to CBO. And the trend is even more alarming. Between 2018 and 2019, federal costs for the new entitlement and the enlargement of Medicaid would increase by a combined 8.9 percent.

That shouldn’t be surprising though, because that’s basically the rate at which Medicare and Medicaid have been growing for more than four decades. And there’s nothing in the House or Senate health care bills which would lead one to assume a new health entitlement program will grow at a more moderate pace in the future than the ones already on the books have done in the past. CBO has said repeatedly that slowing the pace of rising costs will require a fundamental restructuring of financial incentives, for consumers and suppliers of medical services. Nothing currently on the table in Congress comes close to meeting that test.

That was essentially the message CBO delivered to members of the Senate Health, Education, Labor, and Pension committee last week. In response to a question from Sen. Judd Gregg, CBO Director Doug Elmendorf said a bill which simply expanded coverage without fundamental reform “puts an additional long-term burden on top of an already unsustainable path” (Elmendorf’s testimony can be seen here, with his response to Senator Gregg at the 1 hour, 38 minute mark).

Moreover, it seems that President Obama’s own budget director agrees with CBO. Last week, Peter Orszag delivered a letter to House leaders saying their bill doesn’t go nearly far enough to slow the pace of rising costs. But even that didn’t stop the president from saying otherwise in his desperate attempt to round up votes.

The federal government’s budget is already knee-deep in debt, largely because politicians have promised that better days ahead will make all budgetary problems go away. They haven’t, and the current president is making the situation much worse. The last thing any member of Congress should do is simply take the president’s word for it that the health care bills under consideration will ultimately “bend the cost-curve.” If he really believes that — because no one else really does — he should provide some hard evidence to back up his claim. And that’s not a theoretical possibility. He could ask his independent projection experts — not his political appointees — to provide directly to Congress and the public, without review by anyone else, their best estimates of what these bills would do to the long-term (25- or 50-year) budget outlook. Those estimates would be taken much more seriously than unsubstantiated assertions which run against commonsense and all evidence.

posted by James C. Capretta | 9:11 am
Tags: ObamaCare, Blue Dogs, House bill, CBO, projected costs, deficit, HELP, Doug Elmendorf, Peter Orszag, cost-curve
File As: Health Care

Let the Unraveling Begin

The Obama administration has been desperately trying to create a sense of momentum around its health-care push, which is why it is touting the latest “deal” with hospital associations so heavily.

But there are clear signs that Congressional Democrats and the Obama White House have steered the health-care effort into seriously choppy political waters.

Consider:

  1. Yesterday, Senate Democratic leaders all but rejected Senate Finance Committee Chairman Max Baucus’s months-long effort to impose a limit on the tax preference for employer-paid premiums as a way to pay for his reform plan. Media reports indicate he was hoping to generate $340 billion from such a tax to pay for his plan, but that looks highly unlikely now. House leaders were never much interested in the idea, given the adamant opposition of organized labor, and won’t include it in their bill. Revising the tax treatment of job-based insurance was the one potential “reform” with some potential for bipartisan appeal, as it could, under the right circumstances, encourage more cost-conscious consumption of health care. Senator Baucus had been planning to take up consideration of his bill — with the tax on benefits in it — in his committee next week. Where is he going to find a politically palatable $300 billion in a matter of days, let alone one that can also appeal to committee Republicans?
     
  2. Party activists pushed Congressional Democrats over the July 4th recess to write a bill reflecting long-standing party goals — which means government-run insurance and near-total government control. This push has made the chances for bipartisan compromise — already remote — even less likely. In response to the pressure, Senate Majority Leader Harry Reid told Senator Baucus that he is not authorized to cut any deals with Senator Charles Grassley, the ranking Republican on the Finance Committee, which would bind the rest of the Democratic caucus. Senate Democrats have now committed themselves to including a muscular, government-run insurance option in the bill — which is, rightfully, a deal-breaker for the vast majority of Republicans. Indeed, at this point, it is hard to see why Senator Grassley or any other Republican senator would continue to negotiate with Senator Baucus or Senator Reid at all, as it is beyond obvious that Congressional Democrats are only interested in Grassley’s views until they can get a bill off the Senate floor — and even then, they are not interested in true bipartisanship but only enough to get two or three Republican votes.
     
  3. Congressional Budget Office (CBO) Director Doug Elmendorf explained in a letter to Sen. Judd Gregg that adding Medicaid coverage for persons with incomes below 150 percent of the poverty line to the Kennedy-Dodd legislation under consideration in the Senate Health, Education, Labor, and Pensions Committee (HELP) would increase the cost of that bill by around $500 billion. That would put the total cost of the bill at about $1.1 trillion, but it is likely to go even higher because states will balk at picking up their part of the tab for the new Medicaid coverage. Thus, when all of the details are finally in the bill, the Kennedy-Dodd plan is likely to cost close to $1.5 trillion over a decade. But even with this massive expenditure, Elmendorf predicted there would still be 15 to 20 million uninsured Americans.
     
  4. In testimony before the HELP Committee today, Elmendorf said this about the Kennedy-Dodd proposal: “This bill will add substantially to the long-term spending burden for health care on the federal government.” Recall that President Obama pledged to oppose any bill that does not — eventually — “bend the cost-curve” and reduces the government’s long-term cost burden.
     
  5. Rumors are circulating that House leaders are apparently considering a trifecta of popular “pay fors”: $500 to $600 billion in Medicare cuts, a new surtax for households making more than $250,000 per year, and $350 billion in funding from the so-called “pay or pay” employer mandate — while unemployment heads toward 10 percent. All of these proposals are going to generate substantial controversy and opposition, to put it mildly. The surtax would come on top of the Obama administration’s plan to let the Bush tax cuts expire for upper-income households, which would increase the top rate from 35 to 39.6 percent. A new, three-percentage point surtax, for instance, would push the top income tax rate to 42.6 percent — a rate not seen in more than two decades.
     
  6. Oh, and those momentum-generating “deals” with PhRMA and the hospital associations — turns out they aren’t deals after all. House Energy and Commerce Committee Chairman Henry Waxman said today that neither he nor the White House is bound by them, and a White House official agreed. Moreover, it remains unclear how much federal savings they will generate anyway, as they have not yet been assessed by CBO. So what do the deals signify exactly?

The Obama White House and its congressional allies have built expectations among their core supporters that this is the year to pass a government takeover of American health care. With expectations set so high, most elected Democrats have concluded they have no choice but to set out on a forced march to try to do exactly that — despite unified Republican opposition. But a partisan bill means that Democrats own all of the messy and unattractive details too. The debate is no longer about vague concepts of “coverage” and “cost-control” but who pays and who is forced out of their job-based plans. The more people learn about these details, the less they will like them —which is why the Democratic committee chairmen are working desperately to shorten the time between a full public airing and a vote. They’re hoping there won’t be enough time for public opposition to put a halt to the proceedings.

posted by James C. Capretta | 5:40 pm
Tags: ObamaCare, House bill, Max Baucus, Harry Reid, Charles Grassley, CBO, Doug Elmendorf, HELP, cost-curve, mandate, pay or play, Henry Waxman
File As: Health Care

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