Still True Today: Health Care Spending Drives Long-Term Fiscal Woes And Needs A Comprehensive Solution

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Apart from the policy details, the debt ceiling deal is maddening in terms of its focus. On the one hand, drawing all the political oxygen into long-term fiscal policy rather than the short-term jobs crisis is infuriating. But on the other hand, we also seemed to see the president drop the dominant — and correct — progressive frame of the fiscal issue. The thinking here, which drove administration policy during its first 30 months in office, is based on the reality that high projected government spending is driven almost entirely by the rising cost of health care. The issue here is that one thing the government buys is health care for senior citizens. Another thing it buys is health care for the poor. A third thing it buys is health care for federal employees. A fourth thing it buys is health care for veterans. On top of that, it offers a tax subsidy for employer-provided health care plans. Thus, as my colleagues wrote in “Budgeting For Growth and Prosperity”, “Given that health care in the United States is expensive for everyone, it is not surprising that it’s expensive for our government, too.”

The point here is that addressing this in a serious way requires some combination of new revenue to pay for the reality that these health care obligations are expensive, and of measures that systematically decrease the cost of health care:

Otherwise, the consequences for those who rely on public programs would be devastating. Why? Because if spending on those public programs is limited while private-sector costs continue to balloon, some combination of three things will happen:

1. Out-of-pocketcosts for the elderly will grow.Thatis,the difference between what the public insurance programs pay and what the services cost will widen, leaving the elderly, most of whom are on fixed incomes, facing enormous financial strains.

2. Access to care and the quality of that care will decline. Better doctors and hospitals will cater to the higher-paying private market and avoid treating those who receive their coverage from the public sector—namely the elderly, disabled, and poor.

3. Costs will shift from the public to the private sector. As doctors and hospitals get squeezed by government program cuts they’ll raise prices for everyone else.

This was essentially the debate that the Affordable Care Act on the one hand and the House GOP budget on the other began to join. Under the House GOP Medicare privatization plan, the underlying per unit cost of health care services would rise sharply and then the deficit would be reduced by sharply scaling back the government’s willingness to pay. In lieu of controlling the cost of providing health care to the poor, the disabled, and the elderly, the House GOP would simply not provide the health care. The progressive alternative was to seek to reform the system, to make it more like the cheaper systems that prevail in every other country on the planet. Now this whole debate has been kind of weirdly swept under the table, even though it’s the bulk of the ballgame.