Paying for Health Reform III

Last week I published two posts expressing concern about how Congress might pay for proposed health reforms. The first post argued that policymakers should focus on the trajectory of new spending and offsets, not just the cumulative 10-year budget scores. The second post expressed concern that the offsets used to pay for health reform may include policies that otherwise would have been used to reduce our out-of-control deficits; as a result health reform that appears to be “paid for” could nonetheless worsen our long-run budget trajectory.

Needless to say, these issues are receiving lots of attention around the budgeting parts of the Web. Some important contributions include:

  • Over at the eponymous KeithHennessey.com, Keith Hennessey points out something I missed. In a Financial Times piece on June 22, OMB Director Peter Orszag suggested that paying for health reform over a 10-year budget window isn’t enough for budget neutrality. That’s exactly the point I made in my first post. Peter then sets out a second requirement: that health care reform must be “deficit neutral in the 10th year alone.” This is a good step, since it would rule out some trajectories of spending that would obviously worsen the long-run deficit. As Keith points out, this requirement isn’t sufficient by itself: you need to worry about the entire trajectory of spending and offsets, not just a single year. Nonetheless, it is a very good sign that the Administration is pointing out the limitations of 10-year budget scores.

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