January 24, 2009

January 24, 2009 | Commentary on Health Care

Health Care: Obama's Pledge is Far Too Costly

President Obama campaigned on a pledge to "lower health-care costs and ensure affordable, high-quality health care for all." That's quite a tall order - not just for a new administration but for American taxpayers as well.

America now faces a $1 trillion budget deficit, the highest since World War II. War spending is just a fraction of that amount. The main culprit here is irresponsible spending by Congress.

The recession has only worsened the budget situation - and encouraged politicians to promise even more unaffordable spending. The final tab for all the bailouts and economic "stimulus" proposals will be staggering.

Piling Obama's health-care reform plans on top of that would be crushing. The Lewin Group, an independent econometric modeling firm, and the Urban Institute/Brookings Institution Tax Policy Center estimate its price tag at $1.17 trillion and $1.6 trillion, respectively.

There are few ways around this, none of them good.

The new administration and Congress may decide to pay for the new program by taxing businesses and individuals more. Raising taxes in such insecure economic times would be highly irresponsible, making it more difficult for businesses to make payroll. It can force pay cuts, or even layoffs. "Free" health insurance isn't a good bargain when the price is a pay cut or the loss of your job.

An alternative approach may be to call for up-front "investments" with the promise they'll produce long-term savings.

Obama has talked up delivery reforms, such as comparative effectiveness and widespread use of health information technology as a way to improve quality and contain costs. Yet Peter Orzag, Obama's pick to head his Office of Management and Budget, has warned that policy-makers would have to ensure these techniques are aggressively adopted to maximize their benefits.

What do aggressive reforms mean? Just ask former Sen. Tom Daschle, Obama's choice for secretary of Health and Human Services. In his recent book, Daschle calls for a powerful Federal Health Board to make key decisions over what kind of health coverage, and what kind of medical treatments, Americans could get. This board would be independent of Congress, the White House and, therefore, American citizens.

Ultimately, the only way to get the promised savings is to (1) squeeze reimbursements to hospitals, physicians and other health-care providers and/or (2) limit patient access to care and treatment.

Yes, those techniques are used in socialized systems such as the United Kingdom and Canada. But they're also already used in the United States in other government health plans, such as Medicaid.

So, how's that working? Well, fewer physicians are now willing to accept new Medicaid patients - in part because of lousy reimbursements. Patient access to prescription drugs is restricted. And more and more Medicaid patients are clogging emergency rooms seeking routine care - further driving up the cost of health care for everyone.

A third option for Congress: Simply ignore the price tag. Sen. Max Baucus, chairman of the Senate Finance Committee, has indicated that he's willing to push aside the PAYGO rules for a health bill.

Congressional Democrats adopted these rules - which require spending increases to be "offset" with spending cuts or tax hikes - to demonstrate fiscal discipline. Well, bye-bye fiscal discipline, hello crushing debt.

Massive health reform is very difficult - and extremely expensive. As the new administration calls for nationwide community "listening sessions" on health reform, participants would do well to ask themselves how much more they are willing to pay for health coverage and how many benefits and treatments they are willing to forsake in order to bring this campaign promise to life.

Nina Owcharenko is Senior Policy Analyst for Health Care in the Center for Health Policy Studies at The Heritage Foundation.

About the Author

Nina Owcharenko Director, Center for Health Policy Studies and Preston A. Wells, Jr. Fellow
Center for Health Policy Studies

Related Issues: Health Care

First Appeared in the Tallahassee Democrat