During his speech on Wednesday, the president made three crucial but unsubstantiated assertions. He said the plan he will sign won’t add “one dime” to the federal budget deficit, now or at any time in the future. He said this plan would lower costs for families, businesses, and government. And he said he would pay for most of the cost of the plan by eliminating waste and inefficiency in Medicare and Medicaid.
Again, these were assertions, with no facts or detailed legislative specifications to back them up. Indeed, the president made these assertions despite the fact that all available evidence indicates that the plans being worked on in Congress don’t come close to meeting these stated objectives.
First, regarding the budget deficit, we received confirmation on Wednesday from the Lewin Group that the House bill — as amended in the Energy and Commerce Committee — would increase the federal budget deficit by ever increasing amounts after 2019. The Lewin analysis — produced for the Peter G. Peterson Foundation, and available here — indicates the House bill would add over $1 trillion to the annual deficits between 2020 and 2029, including $188 billion in 2029 alone. So, the House bill would make our already bleak long-term budget outlook much, much worse — not better.
This should surprise no one. The Congressional Budget Office (CBO) said weeks ago that the House bill would set in motion a new entitlement program that would grow indefinitely at about 8 percent per year — just like Medicare and Medicaid have for four decades — while the “offsets” to pay for it would only grow at about 5 percent per year. That’s the makings for another very large unfunded liability on the federal books. In an earlier post, I suggested that the House bill would create a $10 trillion unfunded liability over seventy-five years.
Lewin also produced detailed estimates of what the House bill would do to household spending on health care. President Obama and other Democrats like to say they are providing “universal coverage.” But who is really paying for this coverage? It turns out it’s the uninsured workers themselves who would shoulder the financial burden in the Democratic plans. According to Lewin, households with at least one uninsured member would see a jump in their health-care expenses of $1,400 per year, on average. For uninsured households with incomes between $40,000 and $50,000 per year, the jump in annual health-care costs would average $1,700.
This, too, should not be surprising. The bills under consideration really only reduce the ranks of the uninsured by force. To keep federal costs “down,” the bills prohibit workers who are offered coverage on the job from getting new subsidies for insurance through the so-called “exchanges.” But these workers are required to have some coverage to avoid paying the individual mandate “penalty.” Consequently, they really have no choice but to sign up with their job-based plans. And that will mean paying for this insurance through lower take-home pay, whether they can afford it or not. Thus, the individual mandate — the basis upon which Democrats can claim to “cover everybody” — is really just a hidden and regressive tax on lower and moderate wage workers.
Finally, the president again said he could pay for “his plan” with painless reforms which will eliminate waste and inefficiency in Medicare. Where are these painless reforms? The president’s budget, the House bill, and Senator Baucus’s outline are filled with the same kinds of arbitrary, across-the-board provider payment reductions that have been used countless times in the past to hit budgetary goals. These are not “reforms” that will change the basic dynamics of how health care is delivered to patients. There is no effort to make distinctions based on quality or value. All hospitals will get smaller payment increases, no matter how well or how badly they treat their patients. Moreover, all the “fees” that are imposed on insurers, drug companies, and device manufacturers will simply get passed on to patients and consumers in the form of higher prices.
On Wednesday, the president described a health care plan that doesn’t exist. There is no proposal in Congress or offered by the president which would lower costs for households, businesses, and the government, and the president doesn’t have a magic solution which will “bend the cost curve” with painless efficiency gains.
What is clear is that the bills under consideration in Congress would impose massive new hidden costs on low and moderate wage households — the very people the president and his allies say they want to help. And that’s a fact, not an assertion.