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Why is US health care bill affordable?
March 31, 2010 8:51 PM   Subscribe

What reason is there to believe that the recently-passed health care bill is affordable for America? Sure, the CBO projects it to reduce deficits, but isn't it required to use possibly unrealistic legislative assumptions, like Medicare cuts that have never been implemented in the past? Given the incredible growth of Medicare and Social Security costs over the last decades, the powerful interests (like doctors) that may stand against harsh cost-cutting, and the US's aging but heavily-voting population -- what reason is there to believe this bill doesn't start up yet another fiscally irresponsible and politically untouchable entitlement program?
posted by shivohum to Law & Government (16 answers total) 5 users marked this as a favorite
 
I am looking for evidence-based answers or articles, btw, not simple opinions or chat.
posted by shivohum at 8:52 PM on March 31, 2010


These questions: They've all been asked by now

Lots of links already active and being discussed about HCR. Ezra Klein on the "five most promising cost contros" in the HCR bill.
posted by Think_Long at 9:03 PM on March 31, 2010


I would suggest that the first thing you need to disentangle is the concept of "affordable for America" vs "fiscally irresponsible". How does one answer such a question - it is NOT a matter of "evidence" - it's a matter of values. Is it affordable? What are your priorities? What if we cut the defense budget by 50%, eliminate farm subsidies and a thousand other economically unproductive programs - suddenly we may find that we can afford it with ease. So why pick on health care? Why not pick on a thousand other things? It comes down to ideology and to what you believe is economically viable and socially desirable. We think we should have some defense - but perhaps only 25% of what it's now. Meanwhile, you need to look at a broader context. You say that it'll be a huge hole in the budget and America can't afford it. But there is another view - we already are paying collectively more for health care through the private system than anybody else in the world (on a percentage basis), but not getting more, rather getting less. So it may be economically advantageous for the government to step in - it can actually LOWER the costs for all Americans, even if it comes out of our taxes, because the current way leaves less in your pocket. Now, with more in your pocket, the economy can take off, and the government gets back more in taxes, thus being a net positive even budget-wise. Think about highways. Why should the government pay for it? Why shouldn't it all be toll-ways? Because we found that even though the government pays for it, the economic boost is so powerful that you get back MORE than you spent on the highway through greater economic activity and resulting taxes. In other words, you need to look at your question and assumptions in a much deeper and broader way before you get meaningful answers.
posted by VikingSword at 9:04 PM on March 31, 2010 [14 favorites]


I think this article from Econbrowser will give you a good perspective.

First look at Figure 1. It shows the cost of the Patient Protection and Affordable Care Act (PPACA) compared to the cost of the Bush 2001 and 2003 tax cuts and the Iraq war. The PPACA is the only one that is positive for savings. Then he makes the further assumption that the promised savings don't show up. In that case the cost of the PPACA goes very slightly negative and is just a tiny fraction of the cost of the Bush debacles.

Further, look at Chart 1 at the bottom. This shows the additional cost of the PPACA compared to the already projected costs of Medicare and other health spending. The PPACA is barely visible in the chart as a tiny additional sliver.

What these two pictures show is that the cost of PPACA is trivial compared to these other costs we are incurring so it doesn't matter really all that much how accurate the PPACA estimates are -- they don't amount to a hill of beans in the big picture.

Much more important in the long run is attacking the general cost of health care. PPACA is not the real source of the problem. It never promised to fix all that other stuff. For a very little bit of investment we get health insurance for 30 million more people. Reductions to the cost of health fees will have to be tackled in step two.
posted by JackFlash at 9:52 PM on March 31, 2010 [2 favorites]


"Why is US health care bill affordable?"
March 31, 2010 11:51 PM

Think_Long has offered some supportive links for trying to believe that HCR will be affordable in the long run, but frankly, much of the actual implementation is far in the future, and more legislation that "corrects" the current bills may be needed to ensure that HCR costs don't spiral out of sight. At this point, whether you think HCR will save Federal dollars, or drown the gummint in a sea of red ink is mostly blind faith and political opinion, one way or the other.

NYT Op-Ed, March 20, 2010: The Real Arithmetic of Health Care Reform Quotes from a number of sources, none of whom are optimistic about the accuracy of the last CBO numbers quoted by Dems before passage of the bill, and some who think CBO understated bill's cost by at least $1.5 trillion.

March 19, 2010: CBO says health bill increases deficits under Rep. Ryan's assumptions

March 27, 2010: AT&T to take $1 billion charge on health care bill change. More here. Other U.S. companies following AT&T in taking HCR charges prompt Congressional hearing.
posted by paulsc at 9:53 PM on March 31, 2010 [1 favorite]


Think about highways. Why should the government pay for it? Why shouldn't it all be toll-ways? Because we found that even though the government pays for it, the economic boost is so powerful that you get back MORE than you spent on the highway through greater economic activity and resulting taxes.

1) That's a really unfortunate example (due to the free rider problem and many negative externalities associated with road use).

2) The OP is looking for "evidence-based answers or articles, btw, not simple opinions or chat".
posted by ripley_ at 10:05 PM on March 31, 2010


AT&T has been receiving a subsidy from the govt to provide health care for several years. They also get a tax break for the subsidy plus the amount they actually pay in. So either way, the taxpayers are subsidizing healthcare offered by the firms boohooing about how much it is going to cost them, and there's no guarantee that they wouldn't offer worse coverage down the line. Additionally, these companies haven't used the tax breaks to create new jobs or provide better quality coverage to their employees. They appear to be doing some fearmongering because they're sore that the new law no longer let's them receive write off the govt subsidized portion.
posted by anniecat at 10:25 PM on March 31, 2010


*receive or write off
posted by anniecat at 10:26 PM on March 31, 2010


Just a note that the question could be better phrased as "What reason is there to believe that the recently-passed health care bill is more affordable for America than the status quo, or than other politically attainable bills?"
posted by escabeche at 4:39 AM on April 1, 2010


what reason is there to believe this bill doesn't start up yet another fiscally irresponsible and politically untouchable entitlement program?

I am looking for evidence-based answers or articles, btw, not simple opinions or chat.

Frankly, your question seems loaded with basis and opinions, so I'm not sure why you're wanting evidence based answers. If you could point to current examples of "fiscally irresponsible...entitlement programs," it would help give a clearer sense of what you're mean by that phrase and how that compares to the US health care bill.
posted by Brandon Blatcher at 5:16 AM on April 1, 2010 [2 favorites]


Oops, bias not basis
posted by Brandon Blatcher at 5:16 AM on April 1, 2010


This reads a bit like chat/rant-filter. If you're sincere in asking for actual information, perhaps you can clarify exactly what you mean by "affordable for America" or "fiscally irresponsible" and what sort of evidence you would be willing to accept to change your (apparently) already made-up mind.

On the chance that the question is sincere, here are some thoughts:

1) If you want to decide whether this (or any) program is "affordable" or "fiscally irresponsible", you need to look at both the costs and the benefits and figure out how they balance based on your values. Spending $500 on a new toothbrush is fiscally irresponsible. Spending $500 on a new car in perfect condition is a great deal.

2) If you want to figure out what the true costs and benefits of this particular bill are, you're going to have to get down in the weeds of the policy details and do some real studying. I strongly recommend Ezra Klein, who has done a lot of good research and writing on the subject.

3) I personally used to doubt that anything approaching universal healthcare would be practical from a financial standpoint. I changed my mind when I realized that most of the other major industrialized democracies in the world a) already have universal healthcare b) are getting measurably better healthcare outcomes than the U.S. and c) are paying less for their total healthcare expenditures than we are. I refuse to believe that we in the U.S. are somehow uniquely incompetent compared to the rest of the world and are incapable of getting it right. That doesn't address the issue of whether the current health care reform bill that just passed is a good one. It does show that there is no theoretical reason why we can't have affordable universal healthcare.
posted by tdismukes at 6:01 AM on April 1, 2010 [1 favorite]


The real test of ANY government program should focus less on taxes and more on how much is left in the average pocket afterwards. Cutting taxes doesn't help if you have to pay much more for health care, education, local services, etc., since taxes help keep those costs down.

It's easier for the government to find the money to pay for a doctor than it is for me to round up a few hundred people to chip in some of our tax savings.
posted by Chuckles McLaughy du Haha, the depressed clown at 6:47 AM on April 1, 2010


Because everyone, including those unlikely to get sick or into an accident, must be insured. By dramatically increasing the number of people paying for insurance, health insurance should become easier to finance overall. This is how all types of insurance work. It's why car insurance, etc. are all affordable.

Also, it's a lot cheaper for the country than having to pay through the nose when someone that can't afford care is brought to the hospital in an emergency situation.

The cheapest form of insurance based on any historical study is single payer.
posted by xammerboy at 8:07 AM on April 1, 2010 [1 favorite]


I think it's useful to look at more details about where the savings are coming from in the first 10 years before you decide that it's all based on "unrealistic assumptions." (Which I don't think is an unfounded fear; individual Congressman are very sensitive to avoid any perception of cutting benefits for Medicare or underpaying doctors and hospitals, which is the root of the issue with pushing back required payment cuts to doctors that you allude to in your question.)

This chart from the Tax Foundation is probably the best explanation I've seen of where the cost savings to pay for reform (at least in the first 10 years) are coming from. Note that between $418-433 billion--which covers nearly half of the total cost of the reforms--are coming from increased taxes of one form or another, and those tax increases are already law. There's a pretty big difference between Congress being unwilling to implement really huge rate cuts for doctors that would have resulted in many of them abandoning Medicare en masse--which has been the issue with CBO being forced to assume unrealistic budget cuts that everyone knew were never going to happen--and repealing taxes that are already in the law. Repealing a specific tax (versus an across-the-board reduction in marginal tax rates during times of budget surplus) is actually pretty rare and hard to do, I'd argue: everyone, from politicians to budget wonks to upper-and-middle class folks who write letters to politicians, hates the Alternative Minimum Tax and recognizes that it needs to be repealed or modified, but most people think that won't happen anytime soon. I think that's much closer to what is happening here, and looking at the history of the AMT makes me reasonably confident that these taxes won't be pushed back or overturned, no matter how unpopular they may be among the (smaller) groups that are hit by them.

The cuts to Medicare ($460 billion) are the other big chunk of how the ACA is being paid for in the first 10 years, and here I think there's more of an argument to be made that Congress might be vulnerable to interest group lobbying. However, looking at the specific cuts is instructive. I think there's a chance that across-the-board reductions in updates to the FFS payment rate will be pushed back again and again so they never happen, but that's only about $200 billion. (The ACA brings in $1,080 billion in spending cuts or new revenue while only creating $938 billion in new spending, so we have a $142 billion "cushion" before health care reform starts adding to the deficit in the first 10 years anyway.) Other cuts to Medicare I think are much less vulnerable to being pushed back, e.g. reductions in Part D subsidies for high-income people and reducing the overpayments to Medicare Advantage plans.

And that's just the first 10 years. Over the longer term, there is potential for significant savings in the Medicare program (and more generally the entire health care market) by a shift away from the fee-for-service system, which everybody who studies this stuff agrees leads to a lot of waste and unnecessary treatment. That stuff isn't scored in here at all, but it has a high probability of actually occurring, because Congress empowered an independent board to make those decisions on payment reforms. (See a good overview of this issue here.) Congress won't be able to overturn these recommendations easily:
If Congress approves the board's recommendations and the president signs them, they go into effect. If Congress does not vote on the board's recommendations, they still go into effect. If Congress votes against the board's recommendations but the president vetoes and Congress can't find the two-thirds necessary to overturn the veto, the recommendations go into effect. It's only if Congress votes them down and the president agrees that the recommendations die. “I believe this commission is the largest yielding of sovereignty from the Congress since the creation of the Federal Reserve,” says Peter Orszag, who's been one of the idea's most enthusiastic supporters.
posted by iminurmefi at 8:31 AM on April 1, 2010 [2 favorites]


1) That's a really unfortunate example (due to the free rider problem and many negative externalities associated with road use).

With due respect, our current healthcare delivery "system" DOES suffer from both a significant free rider problem and negative externalities associated with poor control of chronic as well as communicable illnesses. Who do you think pays for those big ER bills for the uninsured? It's certainly not the uninsured most of the time. Do you really think you are unaffected by other people's illnesses or that society is just as productive regardless of the health of its citizens? Was it no big whoop when your part-time, uninsured employee had to miss work to be hospitalized for out-of-control diabetes for the fourth time?
posted by drpynchon at 9:34 AM on April 1, 2010 [1 favorite]


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