Obamacare does not curb health care cost crisis

There is something sorely missing from the health care debate right now and that something is health care (see my post on this anomaly). Let me be clear (my favorite Obama phrase) despite what Obama tells you this debate is no longer about avoiding runaway costs of health care. The cold hard truth is that Obama’s health care does nothing to curb the soaring costs of health care. Instead, he promises to increase them.

It’s not just me saying this. Now Elmendorf, the Director of the CBO, agrees with me and stated that in a recent congressional hearing. He said that the bills proposed by congress are missing “the sort of fundamental changes necessary to rein in the skyrocketing cost of government health programs.” What does this mean? Does it mean that the bill is not deficit neutral? There is so much more to this statement than making the bill deficit neutral.

When people are talking about the cost curve to health care or when Obama says that the rate of health care spending is unsustainable what they are referring to is the fact that health care costs are expanding faster than GDP, which will create a future budget crisis for the government and dwindles the average American’s disposable income.

The official CBO graph as of 2007 is below.



The solid line is the ballooning of federal obligations to pay Medicaid and Medicare and the dotted line is GDP. Basically, if nothing is done to curb growing health care costs we will need to increase taxes or deficits need to rise.

Here is a ten year view of the federal deficit spending on health care should we do nothing (courtesy of Keith Hennessey).



Just remember that the above graph is what Obama is referring to when he says unsustainable.

Here is a ten year view of the federal deficit spending on health care should we add Obama’s government health plans (minus any potential savings due to proposed Medicare/Medicaid legislation)



Do you see the problem yet? What we had was a soaring budget deficit spurred on by increasing costs. Obama is proposing some changes to how Medicare/Medicaid are run creating savings (I’m not sure of the validity of the claims, I will simply assume that at least some of them are real because I don’t have the time to research them and it really doesn’t matter anyways). However, he is using those savings not to curb costs, but to fund a large new entitlement.

C Gen that’s great, we’ve added people, but at least we've found a way to pay for it, “what is your problem?” My answer is, “I thought this level of spending was unsustainable?” That’s what Obama keeps telling us. Obama’s plan merely does some adding and subtracting to the budget, it does nothing to the rate at which health costs are increasing. These rates will outpace GDP and given the laws of economics, adding people to the health rolls only agitates the problem by making health costs increase even further. Don’t get me wrong, deficit neutral is a good idea, but it’s like asking me which leg I’d like to have unnecessarily chopped off with a rusty hacksaw and no anesthetic (the answer is my left leg).

Here is why deficit neutral is really just a boondoggle. Let’s say Obama gets everything he wants on health care, including a deficit neutral bill. What this means is we have found a way to increase revenues via taxes and one time government cuts to get us through until 2019. Great, no new deficit! I’m on board, but what happens in 2019? Well if costs continue to outpace GDP, then we will be talking about how to reform Obama’s reform. The decade from 2019-2029 will show a massive unfunded deficit even bigger than the one in 2019. The difference will be that everyone’s taxes are already dramatically higher, we’ve suffered economically from it, we will have fewer options for simple program management cuts because we’ve already made them and we will have millions more people adding to the cost problem. Obama is basically kicking the can down the road, but in 2019 the problem will be even bigger. It is like trying to fix a punctured tire by constantly refilling it with air. Each time it’s refilled the hole gets bigger.

This bill is massively flawed from the cost aspect. It doesn’t do anything to stop health costs from outpacing inflation. On the contrary, it makes the problem worse. Five months ago Obama said that we were in the worst recession since the Great Depression. He didn't take himself seriously then. Today, Obama says that health care costs are unsustainable. It's clear he's not taking himself seriously, again.

He also doesn't take the American people seriously. Here is the fact check for tonight's speech.