James Pethokoukis

Politics and policy from inside Washington

Will healthcare reform create trillion-dollar budget deficits?

August 6, 2009

That is the contention of former White House budget official James Capretta who does the math:

CBO expects the spending in the bill would grow at a rate of least 8 percent annually into the indefinite future, while the revenue to pay for it will only grow at about 5 per cent per year. Hence the “substantial increases” in federal budget deficits beyond 2019.

Although CBO declined to specify any actual deficit numbers beyond 2019, they can be easily calculated, in rough terms, from the information provided in Elmendorf’s letter.

By 2030, if the spending associated with the coverage provisions rises 8 percent per year after 2019 and the revenue rises by 5 percent, the bill would add more than $200 billion per year to currently projected budget deficits. By 2048, the annual deficit increase would top $1 trillion — and only go up from there.

Comments

There are only two systems of health care in the world today.

One is for-profit health care and related support industries completely owned by private enterprise. US is the only country operating such a system.

The other, operating by much of the rest of the world, is full or near universal health care where government owns and controls the health insurance ‘business’. For most of these countries, the actual health care giving organizations are still in the private sector, just that their revenues come from government health insurance payments which are based on a cost-plus policy. In these way, health care workers are well-paid, equipment good, but there is little or profit.

Which explains why US system is so much more expensive than non-US: virtually all the difference is made up of high salaries of professionals, high profits of businesses (hospitals, labs, equipment, drugs, insurance, HMO), high cost of lawyers and malpractice, extreme high costs of administrating a complex insurance payout system.

If US wishes to simply expand coverage to the 50 millions uninsured while keeping the current system, then it will cost another trillion dollar. Likely to come from across the board tax increase.

If US wishes to replace current system with something substantially like the rest of the world, then it must be prepared to remove the high revenues and huge profits of the private health care sector and transfer them to government insurance for universal payouts. This money is multi-trillion dollar over the same period, more then enough to pay for an universal health care system. With no tax increase. How do you nationalize US health insurance industry?

Posted by The Real Deal | Report as abusive
 

As a practical matter, this country lacks the ability to address healthcare (and for that matter ANY problem), in a focused, direct, and coordinated fashion. It is also incapable of really planning much of anything of real value, at least not at this point in time. That type of activity does not fit within our governance model.

What you see here is an example of what happens when ANY entity is run by committee. We’ve known that as a society for a long time.

Our governance model is a “herding cats” governance model, where we let people and the entities they form have the freedom to do most of what they consider to be in their best interests, and we hope that it will also be in society’s best interests.

Sometimes that works for us, and other times it doesn’t. It will never yield consistency in approach, effort, and results. For us to think so is delusional in nature.

We (as a nation) lack the ability to rally around anything, unless it is perceived as An imminent threat to virtually all of us, and that’s not going to happen often. And so we become self-absorbed in thinking about our own personal, close to home minutiae.

There are some positive and negative ramifications associated with ANY alternate approach we might pursue, and the yelling and screaming will always loud and raucous.

As George Will often says, there is the “inertia” which is Washington. There is also the “inertia” which is the U.S. and its constituent parts.

Although this approach has served us well for most of the last 110 years, from a theoretical perspective, one has to wonder how long we can govern ourselves using the “herding cats” governance model, in light of our increase in size and complexity of our citizens.

If the US were run like a business, then every single day, its management team would assess whether its goals are being attained, bust their butts to achieve those goals, ensure that it was getting the maximum value and productivity out of those working for it, and make on the dime changes to most effectively and efficiently reach those goals. In other words, be nimble.

This country is not nimble, and can not be.

I’m not advocating a particular change, either left or right; just the recognition that EVERY governance model has its limitations, and this one is no different. However, for us to think that we can continue to use it and not have negative periods and poor, inappropriate responses to problems, is not reasonable. A country needs to know its limitations.

 

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