Will the Deficit Save Health Reform?

You've probably already heard that the deficit projections released yesterday are a threat to the president's plan to reform health care. In fact, Reuters tried to tell you this a week ago, in a story headlined "New deficit projections pose risks to Obama's agenda." But these critics, and Reuters, are wrong. The latest deficit projections make reforming health care -- and the inclusion of a public insurance option -- all the more important.

The midyear budget projections from the White House and Congress contain two important pieces of information: First, this year's deficit will be some $250 billion lower than anticipated after funds intended to bail out banks go unused. But the economic crisis has led to slower growth, a decrease in tax revenue, and more money spent on "automatic stabilizers" like unemployment insurance, creating one of the largest long-term deficits ever, about $9.1 trillion over the next 10 years.

Opponents of health-care reform are using that jaw-dropping number to say that Americans can't afford to pursue health-care reform, never mind that the president and congressional Democrats intend for the bill to be deficit neutral or that the math and budget experts both testify that most of the deficit is a hangover from the Bush years. (Indeed, all of the measures enacted by President Barack Obama to combat the recession have only added about $300 billion to what the deficit would have been had President George W. Bush's policies continued through 2009.)

Nonetheless, the new numbers are destined to be a political football. Budget expert Stan Collender told reporters on Tuesday that the numbers are "going to be more used for rhetorical rather than substantive discussions. … Those who don't want health care are saying this should stop it in its tracks; those who want health-care reform to continue say this is exactly why we need health-care reform."

Collender is right that a deficit-neutral health-care bill will, by definition, have no direct effect on future government deficits and debt. But look more closely, and it becomes apparent that health-care reform will have major effects on decreasing deficits over the long term, when spending discipline is actually important -- today's deficits are a necessary response to the recession.

The single major driver of growth in government spending is health care, which is increasing widely out of proportion to population growth and, if left unchecked, could make up 25 percent of the United States' gross domestic product by 2025. Proposals currently under discussion in Congress aim to slow the growth in health-care expenses with a variety of policy tools, including a public plan that could increase competition (and thus lower costs overall), cutting deals with various industry stakeholders to find savings, new studies to determine the most cost-effective ways to treat illness, and an independent board to study Medicare and Medicaid reimbursement and set more realistic prices.

Despite the president's focus on health care as deficit reduction and evidence that the Congressional Budget Office, charged with discovering the costs of these bills, chronically overestimates the costs and underestimates the savings of health-care bills, most experts think that no feasible bill will bend the curve as much as is necessary to directly slow the increase in spending -- ironically, the cheapest option, single-payer, is politically toxic. Savings that do result from reform will be required to subsidize health care for most of the 47 million Americans who have no health insurance. But even this kind of health-care reform is important for reducing the long-term deficit.

First of all, reform will provide more information to policy-makers. Studies of comparative effectiveness and data from a public insurance plan will provide a deeper understanding of inefficiencies in the system and the solutions to those inefficiencies. The White House Council of Economic Advisers has also estimated that health-care reform will lead to increases in GDP, reaching over 2 percent in 2020 that would lead to proportional increases in tax revenue and lower deficits. But most important, eliminating the "crazy system of cross-subsidies," as Center for Budget and Policy Priorities economist Jim Horney calls the complex interweaving of publicly and privately subsidized care for the under- and uninsured, would create a much simpler framework for future cost-reduction efforts.

"It really is important to get universal or near-universal coverage in order to help create a system that is more sensible," Horney explains. "That system will help us to design [more efficient] reimbursement systems."

The people standing directly in the way of health-care reform are conservative Democrats who claim to be deficit hawks, like Max Baucus and Kent Conrad in the Senate and the Blue Dogs caucus in the House. Of late, however, their interest in cutting the deficit has been eclipsed by political cowardice in the face of unified Republican obstruction to any and all reform efforts. The stumbling efforts of these supposed paragons of fiscal responsibility to maneuver the politics of health-care reform have decreased the chances of a bill that would reduce the deficit over the long term.

So get it straight: If the latest budget projections are keeping you up at night, the best way to ease your troubled mind is to support health-care reform. Otherwise, costs will keep rising, and deficits along with them. Opportunities to improve health care only come along once in a while -- the last major effort was 15 years ago. Fifteen years from now, it's possible that nearly one-quarter of every dollar spent in the U.S. will be spent on health care -- much of that coming, directly or indirectly, from the government. That sounds fiscally responsible, doesn't it?

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