WILLIAM GALSTON JULY 16, 2009
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CBO director Doug Elmendorf’s written testimony before the Senate budget committee today should be required reading for anyone interested in understanding our long-term fiscal plight. Among its many instructive features, it challenges--tacitly but fundamentally--the Obama administration’s dominant fiscal narrative.
The president and his economic team have tirelessly argued that reforming health care is the key to regaining fiscal stability. In the very long run, no doubt, this is true. But over the next decade (or even the next generation), it is not true. In Box 2 (pages 12 and 13) of his testimony, Elmendorf divides projected growth in Medicare, Medicaid, and Social Security outlays into two factors: the aging of the population and excess cost growth in health care. Between now and 2019, the aging of the population will be responsible for almost all the growth in federal spending for Medicare, Medicaid, and Social Security. Even over the next quarter century, the aging population will be responsible for fully 64 percent of the total increase.
To be sure, aging is more significant for Social Security than for the big health care programs, whose costs are driven by many factors other than demographic change. Still, even for Medicare and Medicaid, the aging of the population accounts for well over half the spending increases expected over the next decade, and for 44 percent between now and 2035.
These figures are consistent with the findings of President Obama’s own Council of Economic Advisors, which reported last month that even if we were able to reduce excess health care cost growth by 1.5 percent points in 2014 and maintain that restraint for the remainder of the decade, the federal budget deficit would shrink by only 1 percent of GDP in 2020--about one-sixth of the deficit CBO projects.
None of this is an argument against health care reform--assuming that it constrains costs, which is by no means guaranteed. In today’s Budget Committee hearing, Sen. Kent Conrad asked Elmendorf a blunt question: “From what you have seen from the products of the committees that have reported, do you see a successful effort being mounted to bend the long-term cost curve?” Elmendorf answered, “No, Mr. Chairman.”
But let’s assume that the Congress eventually passes health reform that constrains costs and expands coverage. Even so, that reform, while necessary for a sustainable fiscal policy, would by no means be sufficient. If the president and his team are serious about regaining fiscal equilibrium once the current crisis passes, they will have to consider cost restraint in every category of federal outlays, as well as fundamental tax reform that increases revenues while diversifying their sources.
4 comments
It's time to embrace a single national health insurance plan, It's how the other industrialized countries cover everyone for a little over half what we spend per person. while having better outcomes. Keeping our messy mix of public and private insurance is just too wasteful. It's one thing for Galston and many other to call for fiscal restraint. What we need is for those in positions of influence to be willing to take on the insurance industry that's spending 1.4 million a day to lobby for keeping their waste in our health care system. Single payer is the public option we can afford and can have better health care to boot.
- bsemple
July 17, 2009 at 12:48am
To bsemple: First of all, if you have cancer or a serious medical condition and have medical insurance, then you'll probably do better in the U.S than anywhere else. That said, the U.S. tends to have worse outcomes than other industrialized countries. The way to reconcile these two facts is that: 1. Americans demographically are at a disadvantage to most other wealthy countries, and 2. Some Americans aren't insured.
First, Americans have demographic issues. If you are a teen and get murdered, for example, guess what? You just brought down the life-expectancy for Americans. If you are very obese and die of related complications , guess what? You also probably brought down life expectancy. What if you were a pregnant young teen who took drugs and your premie, born at 30 weeks, dies after being on a respirator for a few weeks? You just increased infant morality.
The point is that health outcomes aren't purely dictated by quality of medical care - not even mostly. If you transplant the Japanese medical system to the U.S. you won't get the Japanese longevity statistics (the highest in the world). In fact it is arguable that the life expectancy could even go down, though it's arguable.
The second point is that Americans without health insurance bring down life expectancy, as they tend to delay getting care until they're in terrible medical shape. That is one thing that could get improved by having everyone covered. Again, though, you can't blame American doctors for the poor outcomes of patients who don't seek care -- doctors don't run the insurance companies.
- lsokol
July 17, 2009 at 2:02pm
I recommend the data and charts in the following report from the Commonwealth Fund.
www.commonwealthfund.org/.../Chartbook.ppt and Population Aging: A Multinational Comparison Gerard F. Anderson, Ph.D. Peter S. Hussey Johns Hopkins University October 1999
It's a 1999 report--and if it's been updated, please let me know. Note all the single payer countries--Canada, Japan, France, who care for their seniors well. Japan has the highest percentage of population over 65.
You know, we Americans may have to pay a little more in taxes--and get out from under the high- cost yoke of our for-profit insurers.
I was particulary interested in the detail by country--e.g. ownership of long-term care facilities in Canada vs the US. See slides 55 and 61.
- hmseil01
July 17, 2009 at 8:18pm
hmsei101: John Conyers, the Commonwealth Fund, more taxes.................keep it coming!
- lsernoff
July 17, 2009 at 10:35pm