Health Reform is Budget Reform


My colleague Igor Volsky tells me that at a health policy forum for bloggers this morning Ron Pollack from Families USA was questioning policymakers’ commitment to health care reform. They might, he thought, want to focus on other things like bringing the budget deficit under control. This is essentially what Alice Rivlin was saying policymakers should do yesterday. I don’t think this really makes sense. You can’t separate the dysfunction in the health care system from the country’s long-term structural deficit. A poorly performing health care sector is both retarding economic growth (exacerbating budgetary problems) and imposing huge direct costs on the public sector. Let me nab a couple of bullet points from a recent Congressional Budget Office inquiry into the situation:

  • The rising costs of health care and health insurance pose a serious threat to the future fiscal condition of the United States. Under current policies, CBO projects that federal spending on Medicare and Medicaid will rise from about 4 percent of gross domestic product (GDP) in 2009 to nearly 6 percent in 2019 and 12 percent by 2050.
  • Most of that increase will result from rising per capita costs, rather than from the aging of the population.
  • Those problems cannot be solved without making major changes in the financing or provision of health insurance and health care. In considering such changes, policymakers face difficult trade-offs between the objectives of expanding insurance coverage and controlling both federal spending and total costs for health care.
  • In many cases, the current health care system does not give doctors, hospitals, and other providers of health care incentives to control costs. Significantly reducing the level or slowing the growth of health care spending would require substantial changes in those incentives.

There’s a genuine tension between giving health care services to more people and controlling costs. But in a broader sense, getting the budget under control and expanding coverage both depend on creating a more efficient health care sector. The looking budget crisis isn’t a reason to delay action on health care, it’s a reason to avoid delay.