July 3, 2009

July 3, 2009 | Commentary on Health Care

Donor Logos for Congress

What if Congress actually had to pay for any new program it wanted to start? It's a common-sense way to do business. And totally alien to Washington's breezy "spend now, find the money later" zeitgeist.

But there may be some hope after all. Despite getting Congress to pass trillions of dollars in new spending and debt since Inauguration Day, President Obama has established a welcome new principle for health care legislation.

He says it must be paid for. Not financed by borrowing today or in the future.

Sounds good. Of course, this being Washington, there's some fine print. Let's look at it closely so we know exactly what the Obama principle of paid-for health reform really means.

According to budget chief Peter R. Orszag, the president "is committed to the principle that health care reform must be deficit neutral over the next decade."

First, notice the careful reference to paying for the "next decade," not for the life of the program, which would be permanent.

This 10-years-only test is one way Washington routinely hides the long-term cost of a program. It simply ignores all downstream (after 10 years) liabilities.

It's like those credit card offers in the mail. "ZERO interest for 10 months!!!" Everything's fine until you hit month 11, and suddenly you're having to pony up the 18 percent interest from there on out. In Washington, it's a 10-year grace period. All costs after that are, to use budgeting parlance, "outside the budget window."

While congressional budgeteers may conveniently ignore such costs, they are very real, and can be staggering.

Take the 2003 Medicare bill, which added a prescription-drug benefit for seniors. Congress said the program would cost $400 billion. But that was just for 10 years. To get an idea of the long-term cost - not voted on under the budget rules - we would have had to put aside more than $8 trillion to pay the unfunded future costs. That's on top of expected premium revenue.

Our children and grandchildren will be paying that.

Last month, Congressional Budget Office (CBO) bean counters estimated the cost of Sen. Edward M. Kennedy's version of ObamaCare at a stunning $1.3 trillion, with $1 trillion of that simply added to the deficit. But as unusual, that's just for the first 10 years. To pay for the permanent program upfront, we'd have to come up with a whopping $8 trillion. Trillions more if we paid for it over time.

So if Mr. Obama's principle of paid-for health care is to mean anything, we must first change Washington's budget rules. Congress and the administration must be required to show the true long-term cost of their reforms, and explain how they propose to pay for it.

Ironically, Congress requires larger private companies to calculate and disclose their long-term employee health obligations to stockholders. And it forces mortgage lenders to show you the full financing cost - usually far more than the mortgage principal. Lawmakers' reaction to living under their own rules? A deafening silence.

But revealing the long-term cost is just half of what's needed to honor a "pay-for" pledge. The other half is showing where the money will come from and that it's guaranteed.

Mr. Obama says he'll raise $300 billion of the 10-year cost by limiting tax relief for itemized deductions, especially gifts to charities. The rest, he says, will come from more efficiency in health spending, such as Medicare savings.

It may sound promising, but the CBO green eyeshades are reluctant to count on "efficiency" savings. For good reason. Much heralded cost-saving schemes in health routinely turn out to be wishful thinking. In 1997, for instance, Congress declared there would be budget savings from slowing the growth of physician payments in Medicare. But that "saving" has been rolled back each year under pressure from doctors.

So if new spending on health is to truly be paid for by savings elsewhere in the system, here's an idea that any responsible American would understand - bank the savings before you spend them. For the president's health plan, that would mean that before spending for each stage of the plan is authorized, the promised savings to pay for it would first have to be achieved and certified.

If Congress and Mr. Obama are serious about paying for health care, and if they seriously think it can largely be paid for by savings, they have nothing to lose by agreeing to a kitchen-table style of saving money in a cookie jar before they spend it. But if they won't do that, then make sure your children and grandchildren get really high-paying jobs - because they will be stuck with the tab.

Stuart M. Butler, Ph.D., is Vice President for Domestic and Economic Policy Studies at The Heritage Foundation.

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First Appeared in the Washington Times