Obamacare's Costs are still Dire

Chait has some harsh words for me. Fair enough. But while we exchange posts on budget finances, the cost curve is still bending in the wrong direction.

Busted. Jonathon Chait has harsh words for me over at The New Republic, criticizing a recent blog post on Medicare cuts and deficit reduction. Chait points out that the Medicare “savings” in the legislation are independent of the so-called doc fix, as I claimed in my blog. He’s right (even if he misspells my name). I should know better, having written on the legislation’s financing countless times. I apologize.

As I mentioned in my original post, the revised formula on Medicare reimbursements arises out of the Balanced Budget Act of 1997. The formula is quite complicated but can be summarized as follows: if Medicare costs grow faster than economic growth, physician compensation gets trimmed.

Here’s a rare point of agreement among the left and the right: that formula is problematic and simplistic. Republican and Democratic administrations have called for a long-term revision to Medicare fee payment – but, thirteen years later, post-Clinton, post-Bush, and now into the Obama Administration, the formula everyone loves to hate still stands.

My point, though, isn’t to offer a critique as to whether scheduled program cuts are “successful” or “too successful.” Rather, as I stated in my original post, there are significant political impracticalities to cutting physician reimbursement. Time and again, Republican and Democratic leaderships in Congress have haphazardly voted to undo scheduled cuts. Maybe it’s the pressure of the doctors’ lobby. Maybe it’s the seniors’ lobby. Maybe it’s both.

And this Democratic Congress has been no better. In fact, just months after passing health-reform legislation, Democrats are vigorously pushing to delay the cut to 2011 (they had previously voted to delay it from April to June 2010).

Here’s the bigger problem. Part of the justification for ObamaCare has been the argument that we need health reform to tame the deficit. And, when signing the bill into law, the President touted the incredible importance of the legislation in helping to tame the deficit. Democrats suggested that Congressional Budget Office scoring shows that the health legislation is a deficit reducer over ten years (roughly $130 billion).

But that was back in March.

Since, the CBO released its quantitative analysis in May showing that discretionary spending not accounted for in the previous scores would cost $115 billion. The CBO director himself expressed significant doubts about potential deficit reduction. Speaking to the Institute of Medicine, he began: “Rising health costs will put tremendous pressure on the federal budget during the next few decades and beyond. In CBO’s judgment, the health legislation enacted earlier this year does not substantially diminish that pressure.”  Yet, for the record, the White House wasn’t exactly galvanized into action by CBO Director Elmendorf’s words.

And, now into June, it’s worse. The President and his Congressional allies are seeking a big new health expenditure for Medicare. In other words, the fiscal problem that ObamaCare was meant to resolve continues to exist; in fact, White House reforms will push net federal government health expenditures further into the red.