Paying for Health Reform II

Yesterday, I suggested that policymakers should take care in how they pay for any health reform. Paying for reform over the next ten years, which appears to be the consensus budgetary goal, is laudable but not enough.  Policymakers should also make sure that reform doesn’t worsen the longer-run trajectory of our over-stretched federal budget.

As I noted, the Congressional Budget Office made a similar point in an important letter last week. Today, I’d like to emphasis another crucial point that CBO made in that letter — one that I think deserves much greater attention than it has received thus far.

Regarding the offsets that might be used to finance new health-related spending, CBO wrote:

Moreover, any savings in existing federal programs that were used to finance a significant expansion of health insurance would not be available to reduce future budget deficits. In light of the unsustainable path of the federal budget under current law, using savings to finance new programs instead of reducing the deficit would necessitate even stronger policy actions in other areas of the budget.

In other words, it’s likely that policymakers will pick the low-hanging fruit — the least-painful tax increases and spending reductions — to offset the costs of new health spending. That certainly makes sense politically, but unfortunately it may also make it that much harder to address our long-run budget problems.

8 thoughts on “Paying for Health Reform II”

  1. Donald,

    You’ve hit a big nail right on the head, but let me put a finer point on it. The President has proposed a variety of important revisions to the Medicare and Medicaid programs that would reduce their outlays significantly. The President is to be commended for doing so, and the Senate Finance Committee is to be commended for considering these cuts favorably, at least in the abstract.

    Both Medicare and Medicaid are wildly unaffordable in their current forms. Projected outlays far outstrip available resources, either those resources dedicated to the programs or even the nation’s ability to pay these benefits.

    Therefore, these proposed cost savings from Medicare and Medicaid are important to bring these programs toward sustainability. The savings are not then available to offset other spending.

    We cannot acknowledge that projected spending is unaffordable, reduce that spending, and then use the reported “savings” to offset other spending. Not spending funds we do not have does not create a resource to spend.

  2. Our financial deficit is a huge problem; our leadership deficit is even larger. How many senators, congressman, white house staff, cabinet officers, etc have even mentioned your point? THIS is the real problem in Washington (and almost all States).

Comments are closed.