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February 5, 2013

Health Care and the Debt Deal

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In agreeing to a temporary increase in the debt ceiling, the House attached several conditions. One was a commitment to pass a budget that will balance within 10 years. Meeting that goal is important not only for the country’s fiscal future but also for the future of the country’s health care.

Health care entitlements are a major driver of federal spending. In 2011, Medicare and Medicaid alone accounted for nearly a quarter (more than 23 percent) of all federal spending.

In his Inaugural Address President Obama stated, “We must make hard choices to reduce the cost of health care and the size of the debt.” The President is right. But his own health care law has made the situation worse, not better.

When Obamacare was passed, its supporters insisted the law would “bend the cost curve down” and “reduce the deficit.” Today, reality has set in. The Congressional Budget Office estimates Obamacare will add almost $1.6 trillion in new spending over the next 10 years. It obligates an estimated $1 trillion for subsidies to individuals for purchasing coverage through the government exchanges and $644 billion for states agreeing to expand their Medicaid programs. To help pay for the new entitlements, it takes over $700 billion out of an “old” one—Medicare, a program already teetering on the brink of insolvency. It also relies on unsound and unreliable savings, shifty Washington budget gimmicks, and imposes over $800 billion in new penalties and taxes that affect all Americans.

America can’t afford health reform done this way. The House should start with repeal of Obamacare. But most urgent is to stop the most costly provisions of Obamacare slated to take effect next year. Specifically, Congress should eliminate the exchange subsidies and the enhanced federal match for the Medicaid expansion. Stopping these provisions would save the federal government more than $1.6 trillion over the next 10 years.

Politically, restraining these future obligations should be easy. There are no current beneficiaries, hence ending it would affect no one.

Although the thrust of the law is still a year away, the flaws of Obamacare are well documented and continue to grow. Most recently, news that insurance premiums were growing by double digits raised new questions about whether this health care law can actually work as the authors intended.

Desperate to deflect attention away from its failures and shortcomings, defenders of Obamacare are rolling out the next phase of Obamacare. Ideas such as strengthening the individual mandate penalty, expanding the powers of the Independent Payment Advisory Board, and squeezing out more efficiencies by adding even more government regulations. Evidently, they think the way to “fix” Obamacare is to double-down.

That approach, of course, assumes that to more price controls and more regulations will solve the country’s fiscal and health care crisis.

On paper, price controls and regulations may appear to reduce spending. The appearance of savings often lures support for such policies. But, price controls and government regulations don’t necessarily curb health care costs and have an inescapable real-world cost that doesn’t appear on paper: rationing of medical care.

There is a better way to tackle coverage and health care spending without turning personal health care decisions over to the government. Instead of advancing a health care system dictated by the government, Americans should have access to coverage of their choice where insurers and health care providers compete to provide the best care at the best price. The Heritage Foundation has outlined such a plan in its Saving the American Dream proposal.

The President and his defenders are obviously ready for another fight on health care. With the pledge of bringing the federal budget to balance in 10 years, the House of Representatives appears poised to do the same. If leaders in Washington are serious about getting spending—including health care spending—under control, they must get the policy right. That starts with stopping Obamacare’s unaffordable new entitlement spending and focusing on fixing the current entitlements, Medicare and Medicaid, to ensure their solvency without bankrupting future generations.

-Nina Owcharenko is director of the Heritage Foundation’s Center for Health Policy Studies and its Preston A. Wells, Jr. Fellow.

First appeared in Real Clear Politics.

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