Its hard to believe almost any budget numbers coming out of Washington, D.C., these days. The reason? The Obama administration is cooking the books.
Okay, its not actually violating any law. But perhaps it should be against the law for the Office of Management and Budget to do what it routinely has been doing: putting out budget forecasts that everyone inside the Beltway knows are not real. If a private CPA did that, he would lose his license to practice.
Heres the backstory. Health care spending in this country has been growing at twice the rate of growth of our income on a real, per capita basis. Although there has been modest slowing during the Great Recession, thats been the trend for the past 40 years and the United States is not unique. Our health care spending growth rate is in the middle of the pack among developed countries.
Clearly we are on an unsustainable path. With each passing year, health care crowds out more and more other goods and services we want to consume. If it were possible to stay on the path we are on, eventually we would have nothing to eat, nothing to wear and no place to livebut we would all have really great health care.
Now even though the path is unsustainable, it is still the path we are currently on. Private health care spending, Medicare, Medicaidthe entire health care system ? is growing twice as fast as our ability to pay for its growth.
But the Obama administration, desperate to promise benefits that it knows it cannot pay for, has found a solution: making up budget numbers.
The problem begins with the Affordable Care Act (ObamaCare). Every time the administration talks about this new entitlement, they make it sound like its an enormous free lunch. Everyone in America has been promised affordable health insurance and the only people who are going to suffer are a few rich people.
Unwilling to raise the taxes needed to pay for this entitlement, the administration decided to fund almost half the cost by robbing Medicare. The figure is $716 billion over the next decade, but thats just the beginning. Under the Affordable Care Act, Medicare is set to grow only a tiny bit faster than the growth of national incomeforever!
So lets recap. Spending on the elderly and the disabled will be growing at one rate while the rest of the health care system will be growing at twice that rate. The Medicare Office of the Actuaries has included two graphs in the latest Medicare Trustees report showing what this will mean. These graphswhich have never appeared in the mainstream media or even been referred to by the mainstream mediashow Medicare doctors fees dropping below Medicaid fees in the near future and falling progressively behind Medicaid and private sector payments, indefinitely into the future.
One out of seven hospitals will leave Medicare in the next seven years, say the actuaries, and beyond that things just get worse and worse. Access to care will become a huge issue as waiting times to see doctors and enter hospitals grows. Harvard economist Joe Newhouse foresees senior citizens seeking care where Medicaid patients and the uninsured now goto community health centers and to the emergency rooms of safety net hospitals. From a financial point of view, seniors will be less attractive to doctors than welfare mothers.
Now if the administration had been willing to come clean about all of this, I would say thats what leadership is all about. Its about making tough choices. Seniors will have to have less so that younger folks can have more. But that of course, is not what the president is saying. Time and again, the president, the vice president and every leading Democrat in Congress have referred to the Medicare spending reductions as savings that will not harm the elderly in any way.
This is not leadership. This is not making tough choices. This is bait and switch. And if the administration wont own up to what it has done todaywhen there is no obvious painwhat do you think future politicians are going to do when real seniors cant find a doctor who will see them?
Even after robbing Medicare, the administration still did not have enough money to pay for its new entitlement. So what did it do? It pulled another bait and switch. Buried deep in the 2,700 page legislation is the little reported fact that after 2018 the subsidies for private health insurance are going to grow at the same rate as Medicarei.e., just a tad faster than national income is growing.
Remember the Democrats complaint about Paul Ryans Medicare reform plan? The premium support seniors would get to buy private insurance would grow at a slower rate than the actual premiumsshifting more and more of the cost to seniors through time. Well, thats exactly what the Democrats are planning to do under ObamaCare to young people. The difference is that the Ryan plan was an undeveloped concept, whereas ObamaCare is the law of the land.
Think about this for a moment. The new law will force all of us to purchase insurance whose cost is likely to grow at twice the rate of growth of our incomes. But after a few years, the subsidies will drop down to the lower growth path as we are all forced to spend more and more of our disposable income on a health plan that will become increasingly unaffordable!
And if you get insurance from your employer, there are no subsidies at allexcept for the smallest firms.
If you think any of this is politically sustainable, I have a bridge in Brooklyn I want to sell you.
If you dont think what I am describing is sustainable, then beware that all the budget numbers coming out of Washington are wrong. The real budget crisis is much, much worse.