Tuesday, July 28, 2009

The cost of "reform"

The latest CBO report was released yesterday (click here) analyzing the specifications related to health insurance coverage that are reflected in the America’s Affordable Health Choices Act, which was released by the House Committee on Ways and Means on July 14. Here are the highlights (emphasis mine):

Looking ahead to the decade beyond 2019, CBO tries to evaluate the rate at which the budgetary impact of each of those broad categories would be likely to change over time. The net cost of the coverage provisions would be growing at a rate of more than 8 percent per year in nominal terms between 2017 and 2019; we would anticipate a similar trend in the subsequent decade. The reductions in direct spending would also be larger in the second decade than in the first, and they would represent an increasing share of spending on Medicare over that period; however, they would be much smaller at the end of the10-year budget window than the cost of the coverage provisions, so they would not be likely to keep pace in dollar terms with the rising cost of the coverage expansion. Revenue from the surcharge on high-income individuals would be growing at about 5 percent per year in nominal terms between 2017 and 2019; that component would continue to grow at a slower rate than the cost of the coverage expansion in the following decade. In sum, relative to current law, the proposal would probably generate substantial increases in federal budget deficits during the decade beyond the current 10-year budget window.
My take on this: If cost savings is the objective, the current plan will not get us there. Basically, it comes down to this -- you can either expand health care coverage or reduce costs, but not both as the above analysis shows. It would take a miracle, not rhetoric, to pull that one off.

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