Health Care Reform: Two Important Points
By Arnold Kling
1. The “score” of the Baucus bill as not adding to the deficit is far too generous. CBO Director Douglas Elmendorf writes,
The projected savings for the proposal reflect the cumulative impact of a number of specifications that would constrain payment rates for providers of Medicare services. The long-term budgetary impact could be quite different if those provisions were ultimately changed or not fully implemented.
In other words, the bill is funded, in large part, by promising future cuts in Medicare payments. Elmendorf hints that these may not happen. Even worse, if they do happen, they will “use up” some of the political willpower to cut Medicare. Given that Medicare faces tens of trillions of dollars in unfunded liabilities, a bill that uses cuts in Medicare to fund health insurance reform rather than to shore up Medicare’s own finances ought to be scored as worsening the long-term fiscal outlook.
2. Mark Thoma does not like Martin Feldstein’s health reform proposal to try to limit a family’s out-of-pocket health care spending to 15 percent of income. In one respect, I share Mark’s concern that dealing with spending one year at a time is sub-optimal. That is why I offered a different approach in my book. However, I am strongly convinced that Feldstein’s approach is far better than what we are going to see in this year’s legislation. Feldstein writes,
Specifically, the government would give each individual or family a voucher that would permit taxpayers to buy a policy from a private insurer that would pay all allowable health costs in excess of 15 percent of the family’s income. A typical American family with income of $50,000 would be eligible for a voucher worth about $3,500, the actuarial cost of a policy that would pay all of that family’s health bills in excess of $7,500 a year.
I believe that our current health care finance system is unsustainable, and that the proposals in Congress are just patches for this unsustainable system. Ultimately, we will either move toward a government-run system (and by that I mean not just government running an insurance system, but government running the entire health care delivery process) or we will move toward a system based largely on vouchers.