November 24, 2009

November 24, 2009 | Commentary on Health Care, Health Care Reform

Healthcare Reform -- Could History Repeat Itself?

Most people agree that one of the central problems with healthcare is it keeps getting more expensive. But there's no reason to think Congress' attempt to expand federal health programs is really the smartest way to bring these costs under control. In fact, history tells us otherwise. Studies shows that cost estimates for government programs are almost always much lower than the actual cost.
Consider the historical record for just two public health programs.

Medicare was first introduced in 1965. Currently, it covers 40 million people who are either older than 65 or have certain disabilities. At its inception, congressional estimates predicted that nearly every part of Medicare (Part A, Homecare Benefit, and Catastrophic Coverage Benefit) would cost much less than it actually has.
In fact, the cost of the program was so completely underestimated that a Joint Economic Committee (JEC) report in July noted, "the House Ways and Means Committee predicted that the Medicare program in its entirety would cost $12 billion in 1990. Actual Medicare spending in 1990 was $110 billion -- off by nearly a factor of 10."
Keep that in mind when lawmakers insist their bill will cost $1.2 trillion (a number the Congressional Budget Office reached after making several unlikely assumptions). Imagine, instead, that the House bill turns out to cost 10 times that much. That's more than $12 trillion -- more than the value of half of everything produced within the United States. Would this proposal even be considered if that were the case?
Let's turn to another example: Medicaid. It covers the poor, serving more than 59 million people. That's more than any other medical program in America. Unlike Medicare, however, Medicaid was supposed to be a temporary program.
Instead, it grew into a permanent one. Along the way, the price tag has also grown to colossal levels. Although small at its inception in 1965 (relative to Medicare), according to, the program grew to account for eight percent of state's budgets by 1985. Just 20 years later, Medicaid consumed 22 percent of state's budgets, and that, combined with federal spending, amounted to $330 billion.
What's more, the federal government pays more than half of the bill -- 57 percent. So aside from the cumbersome load on the states, it is also weighing down the federal budget, just as current proposals being considered in Congress would do. And there's no end in sight. Enrollment continues to increase about five percent a year, even before the unprecedented expansion called for in the recently passed House of Representatives bill, H.R. 3962. This means costs will continue to increase at unsustainable levels for both the state and federal governments.
Government entitlement programs often start as small programs with low projected costs but usually quickly deliver uncapped spending and growth. Over the years, Congress has failed to address these problems.
According to the Medicare Trustees Report from the Social Security Administration, Medicare is projected to run out of funds by 2017. Meanwhile, Medicaid is consuming an unsustainable portion of the budget, which will suppress economic growth.
Polls show the American people are wary of a new government health insurance program. History shows they're right to be.

Israel Ortega is the Editor of Heritage Libertad. David Weinberger is the Communications Coordinator at The Heritage Foundation.

About the Author

Israel Ortega Contributor, The Foundry

David Weinberger Communications Coordinator: Editorial Services
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