2010 March 21 Sunday
New Health Care Entitlement To Expand US Deficits

In a New York Times Op-Ed Douglas Holtz-Eakin, a former director of the Congressional Budget Office, explains the fantasy financial numbers underlying the Democrats' big health care reform bill. This bill is a fiscal disaster piled on top of the existing much larger fiscal disaster.

ON Thursday, the Congressional Budget Office reported that, if enacted, the latest health care reform legislation would, over the next 10 years, cost about $950 billion, but because it would raise some revenues and lower some costs, it would also lower federal deficits by $138 billion. In other words, a bill that would set up two new entitlement spending programs — health insurance subsidies and long-term health care benefits — would actually improve the nation’s bottom line.

Could this really be true? How can the budget office give a green light to a bill that commits the federal government to spending nearly $1 trillion more over the next 10 years?

I certainly suspected the CBO cost and revenue figures over the next 10 years for something this massive couldn't possibly be plausible. Turns out they're not.

The answer, unfortunately, is that the budget office is required to take written legislation at face value and not second-guess the plausibility of what it is handed. So fantasy in, fantasy out.

In reality, if you strip out all the gimmicks and budgetary games and rework the calculus, a wholly different picture emerges: The health care reform legislation would raise, not lower, federal deficits, by $562 billion.

Please click thru and read the details of this political and financial fraud. It is amazing.

This bill, which at the time of this writing looks set to pass, will accelerate the coming US sovereign debt crisis. Much higher taxes for the middle class and severe cuts in entitlements lie in our future. This bill represents a high point in the push for ever growing entitlements. The overreach of the US government now has reached a point where a sovereign financial crisis is inevitable. That crisis will make the crisis of 2008 seem small in comparison.

Update: More on the fantasy financial numbers:

The 153-page fix-it bill assumes that future Congresses will not only be willing to cut Medicare payments to doctors and hospitals by 21 percent immediately but to cut them even more in the future. No Congress has ever demonstrated any willingness to take such actions, according to Joseph Antos of the American Enterprise Institute (AEI) and formerly of the CBO.

Further, in order to pay back the labor unions for their support, the bill moves the trigger date for a tax on Cadillac health-insurance policies to 2018, per an agreement hammered out with President Obama during closed midnight negotiating sessions at the White House in January. But the lost revenues are made up by indexing the tax on these high-end insurance plans at the rate of inflation (instead of inflation plus one percent), meaning the tax will affect more plans, more quickly.

Update II: The CBO is skeptical of its own health care cost projection.

Update III: BTW, want a health care system more like some European countries? Better hope you do not get cancer.

Share |      By Randall Parker at 2010 March 21 05:37 PM  Economics Entitlements

Black Death said at March 22, 2010 5:36 AM:

A lot of Baby Boomers are looking to Medicare to cover their health costs when they turn 65. Well, they better keep looking. If reimbursements are cut (and Medicare reimbursements are already on the low end of the scale), fewer doctors (especially specialists) will accept them, and even some hospitals may decide they can't afford to lose money on every patient and make it up on volume (this has already happened at the Mayo Clinic in Arizona). Patients will have to look to their own resources to finance their care.

The very idea that some massive new government entitlement program will save money is preposterous. When has that ever been the case? Randall. you are probably correct that this represents the high water mark of the entitlement programs. From now on, the tide will be going out. A sovereign debt crisis is unavoidable.

mike said at March 22, 2010 9:43 AM:

Thus the need to pass amnesty ASAP. That will expand the voting rolls of young Hispanics and other nonwhites who care nothing about the old mostly white folks on Medicare, thus making it politically feasible to enact massive Medicare cuts - which will in turn cause those pesky old white people to die sooner thus making larger cuts more feasible in the future. Entitlement reform, people!

Observer said at March 22, 2010 1:54 PM:

It appears that if passed in its present form, the health care bill will ignore merit in favor of ethnicity. The bill is entirely unfair to Caucasian, Asian, Jewish, and Hispanic whites, (as defined by the federal census) with aspirations of becoming future US doctors.

The bills authors have stipulated a wide variety of preferences and mandates for 'underrepresented minority groups' (African American and Mestizo Latinos) in federal health services grants, medical training and contracts.

For Example, on pages 884-885 the bill states: "In awarding grants and contracts . . . the Secretary shall give preference to entities that have a demonstrated record of training . . . individuals who are from underrepresented minority groups or disadvantaged backgrounds . . . ."

There is similar language found in the bills following pages.
Pages: 879-880
Pages: 881-882
Page: 883
Pages: 887-889
Pages: 889-890
Pages: 908-909

kurt9 said at March 22, 2010 2:28 PM:

The CBO score of the bill was fraudulent. It assumes that the Medicare/Medicaid reimbursement cuts will be implemented. These are not in the bill that was passed last night, but are in the follow on "fix it" bill that is currently in the house. Of course, Obama promised the AMA that these cuts will not be implemented in order to get their support for the first bill. If the "fix it" bill does pass, Obama will have back-stabbed the AMA. If it does not, the CBO score is completely fraudulent.

NotProgressive said at March 27, 2010 8:43 PM:

Our economic system will collapse, it is a mathematical certainty. Einstein said the interest rate curve was one of the wonders of the universe. Large amounts of debt will compound and become very large. All of our money issued is debt money, that is we pay interest just for the right to use money. In this way, rent seekers live off of the productive, and gain a upper controlling hand. These rent seekers work very hard typing numbers into their computers in order to create money, to give you a loan. (When you take out a loan at the bank, somebody elses account does not go down in value, but instead the banker monetizes you by creating new money. Has your savings account ever gone down because the bank used some of the money to give a loan to somebody else?)

Soon, just the interest payment on the debt will be more than we can afford. This is also a certainty since the principle debt is not being paid down.

What comes after the collapse is up to the American People. Personally, I find the answers all are in the past. We can use Sovereign money, like Benjamin Franklin did, and take control of our money. We can tweak the constituion to prevent future termites from infecting it. For example, if we didn't have the 17'th ammendment (direct election of Senators#, our State's would have recalled their Senators during this medical bill fiasco. With popularly elected Senators #not OK with the founders) as we have now, the Senators are not answerable to their States. A true bicameral legislature is not what we now have, it was undermined.

Any system's structure predicates the output. We complain about how corrupt our elected leaders are. But, our system was corrupted almost from the beginning, as private money interests repeatedly attacked us. Jefferson hoped that we would be wise enough to adjust our constitution because he was certain the future would require it.

A quote from Benjamin Franklin's diary: There was abundance in the Colonies, and peace was reigning on every border. It was difficult, and even impossible, to find a happier and more prosperous nation on all the surface of the globe. Comfort was prevailing in every home. The people, in general, kept the highest moral standards, and education was widely spread.

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