Hearing: The Long Term Budget Outlook

Senate Budget Committee
July 16, 2009
Sen. Kent Conrad: Dr. Elmendorf, I’m going to really put you on the spot because we’re in the middle of this health care debate, but it’s critically important that we get this right. Everyone has said, virtually everyone, that bending the cost curve over time is critically important and one of the key goals of this entire effort. From what you have seen from the products of the committees that have reported, do you see a successful effort being mounted to bend the long term cost curve?
CBO Director Douglas Elmendorf: No, Mr. Chairman. In the legislation that has been reported we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount, and on the contrary, the legislation significantly expands the federal responsibility for health care costs.
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Sen. Judd Gregg: Well, Mr. Director, your testimony has been sobering today… The present plans as they’ve been produced have no significant cost spending events in them relative to reimbursement and relative to the way that they structure health care, that most American’s premiums aren’t going to go down and they will continue to go up, and that the debt of this country is unsustainable on our present course, and there isn’t a whole lot in this health care debate to date relative to the bills that have been produced that is going to do anything but continue to aggravate that and actually expand that problem. That’s my summary of what you’ve said. Is that a reasonable summary?
Douglas Elmendorf: … on the summary of the sobering perspective, yes, I agree with that, Senator. I’m sobered by having to give it.
http://budget.senate.gov/democratic/hearingstate.html

Is the health care cost debate limited to concerns about federal spending on health care, or is it about total health care spending? The distinction is very important because, if policies are limited to slowing the increase in the rate of federal health spending, many of those policies simply transfer costs from the government to individuals and businesses. It will give us little consolation to see the health care component of the federal budget in balance if individuals and businesses can’t afford health care.
It is informative to note that Chairman Conrad asked about products of the committees that would bend the long term cost curve, presumably the curve of the growth in our national health expenditures, and CBO Director Elmendorf’s response was limited to the trajectory of federal health spending.
Deficit hawk Gregg has continued to pound on the projected unsustainable growth in Medicare and Medicaid spending, and he is right that we should be concerned. But again, instead of policies that would merely shift costs out of the federal budget and on to individuals and businesses, we need policies that would reduce total health care cost increases to sustainable levels for everyone. This is what is interesting about Sen. Gregg’s question and Dr. Elmendorf’s response. They have concluded that the current legislative proposals are not going to have a significant impact on the upward trajectory of total health care costs.
It is unfortunate that the one measure that both indicated would be a very important policy to adopt would be to end the deductibility of employer-sponsored health plans. That helps with the federal budget, but it further increases health care costs for businesses and their employees.
For those who are very concerned about future federal deficits, there is a solution. Simply remove health care costs from the federal budget. Projections of future budget spending have been shown to be fully sustainable if health care costs are left out. Then set up a separate budget for health care financed through an equitably-funded universal risk pool.
President Obama has stated repeatedly that we must control health care costs as the first priority, and then we can cover everyone. The current proposals do neither. But with a single risk pool, and with the monopsony power of our own public administration we would be able to ensure health care value for absolutely everyone.

Senate Budget Committee
July 16, 2009

Sen. Kent Conrad: Dr. Elmendorf, I’m going to really put you on the spot because we’re in the middle of this health care debate, but it’s critically important that we get this right. Everyone has said, virtually everyone, that bending the cost curve over time is critically important and one of the key goals of this entire effort. From what you have seen from the products of the committees that have reported, do you see a successful effort being mounted to bend the long term cost curve?

CBO Director Douglas Elmendorf: No, Mr. Chairman. In the legislation that has been reported we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount, and on the contrary, the legislation significantly expands the federal responsibility for health care costs.

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Sen. Judd Gregg: Well, Mr. Director, your testimony has been sobering today… The present plans as they’ve been produced have no significant cost spending events in them relative to reimbursement and relative to the way that they structure health care, that most American’s premiums aren’t going to go down and they will continue to go up, and that the debt of this country is unsustainable on our present course, and there isn’t a whole lot in this health care debate to date relative to the bills that have been produced that is going to do anything but continue to aggravate that and actually expand that problem. That’s my summary of what you’ve said. Is that a reasonable summary?

Douglas Elmendorf: … on the summary of the sobering perspective, yes, I agree with that, Senator. I’m sobered by having to give it.

http://budget.senate.gov/democratic/hearingstate.html

Comment:

By Don McCanne, MD

Is the health care cost debate limited to concerns about federal spending on health care, or is it about total health care spending? The distinction is very important because, if policies are limited to slowing the increase in the rate of federal health spending, many of those policies simply transfer costs from the government to individuals and businesses. It will give us little consolation to see the health care component of the federal budget in balance if individuals and businesses can’t afford health care.

It is informative to note that Chairman Conrad asked about products of the committees that would bend the long term cost curve, presumably the curve of the growth in our national health expenditures, and CBO Director Elmendorf’s response was limited to the trajectory of federal health spending.

Deficit hawk Gregg has continued to pound on the projected unsustainable growth in Medicare and Medicaid spending, and he is right that we should be concerned. But again, instead of policies that would merely shift costs out of the federal budget and on to individuals and businesses, we need policies that would reduce total health care cost increases to sustainable levels for everyone. This is what is interesting about Sen. Gregg’s question and Dr. Elmendorf’s response. They have concluded that the current legislative proposals are not going to have a significant impact on the upward trajectory of total health care costs.

It is unfortunate that the one measure that both indicated would be a very important policy to adopt would be to end the deductibility of employer-sponsored health plans. That helps with the federal budget, but it further increases health care costs for businesses and their employees.

For those who are very concerned about future federal deficits, there is a solution. Simply remove health care costs from the federal budget. Projections of future budget spending have been shown to be fully sustainable if health care costs are left out. Then set up a separate budget for health care financed through an equitably-funded universal risk pool.

President Obama has stated repeatedly that we must control health care costs as the first priority, and then we can cover everyone. The current proposals do neither. But with a single risk pool, and with the monopsony power of our own public administration we would be able to ensure health care value for absolutely everyone.