Obama’s Budget Claims $622 Billion in Health Care Savings But Doesn’t Count Cost of Health Care Reform
August 31, 2009 - 6:02 PMPresident Obama's budget update includes $622 billion in purported health care "savings" to offset the cost of health care reform plans. But the update leaves out any estimate of how much those reforms might cost.
The new, updated budget review includes new estimates about how much the administration thinks it will save taxpayers by making various cuts and reforms to Medicare and Medicaid.
“[T]his Mid-Session Review now identifies a total of $622 billion in savings over 10 years in Medicare and Medicaid,” the report states. “This brings the Health Reserve Fund total to $954 billion over 10 years.”
The total – the additional $332 billion needed to attain $954 billion -- would come from tax increases on philanthropic and other tax-deductible giving and higher estate or “death” tax rates, states the report.
Conspicuously absent from the budget update’s health care section are any estimates as to how much those reform proposals might cost, despite the fact that the Congressional Budget Office (CBO) had produced estimates of both House and Senate reform proposals prior to the publication of Obama’s budget revision.
Both of those estimates show that the health care proposals currently stalled in Congress would cost the federal government approximately $1 trillion over 10 years, more than the administration’s supposed savings of $954 billion.
The House version of health reform would, according to the CBO, offset most of its total price not with the administration’s savings plans, which it includes, but with $583 billion in higher taxes.
The House Medicare and Medicaid savings proposals would, according to the CBO, save the federal government only $219 billion, a far cry from the $622 billion the administration projects. In fact, CBO Director Douglas Elmendorf said that while “potential” savings were possible, actual savings would be much harder to achieve.
“Significant savings seem possible because the available evidence implies that a substantial share of spending on health care contributes little if anything to the overall health of the nation,” he said in a June 16 analysis entitled “Health Care Reform and the Federal Budget.”
“Therefore, experts generally agree that changes in government policy have the potential to produce substantial savings in both national and federal spending on health care without harming health,” he said. “However, turning that potential into reality in a sector that accounts for one-sixth of the U.S. economy is likely to be a prolonged and difficult process.”
Elmendorf also said that policy proposals currently under consideration would not save the country any money because the federal government planned to spend just as much, if not more, than it might save.
“Some policy options under consideration would yield savings that grew in tandem with health care spending -- reducing the level of federal spending on health care but not affecting the measured rate of spending growth after the first few years,” he said.
“For example, the largest savings proposed in the president’s budget would arise from a decrease in payments to private health insurance plans operating under the Medicare Advantage program,” said Elmendorf.
He further stated that because Obama’s health reforms would last longer than 10 years, the total cost of his package would not even be offset by his planned savings.
“If enacted, that change would permanently lower the level of Medicare spending, but it would probably not offset a noticeably larger share of the cost of an expansion of insurance coverage in the second 10 years than in the first,” said Elmendorf.
Despite all the president’s proposed cuts in Medicare spending and his promises to “bend the curve” in federal health spending, his budget does not reduce Medicare costs over the next decade, nor does it remedy the multi-trillion dollar deficit the program will incur over that time.
Medicare, which cost the federal government $425 billion in 2009, will see its costs increased by tens of billions of dollars each year, ultimately costing Americans $6.4 trillion by 2019, according to the budget update. Medicare payroll taxes will not account for anywhere near that amount, totaling $2.5 trillion over the next decade, a deficit of $3.9 trillion.
In fact, Medicare spending will more than double over the next decade, from $425 billion in 2009 to $871 billion in 2019.
That fact, said Elmendorf, would only make the country’s fiscal problems worse.
“Without meaningful reforms,” he added, “the substantial costs of many current proposals to expand federal subsidies for health insurance would be much more likely to worsen the long-run budget outlook than to improve it.”