Democrat’s Government Health Care Will Increase, NOT Decrease, Costs

We don’t have any idea how expensive Obama care will truly be.  You can bet your britches – and you may end up actually being forced to BET your britches – that it will cost a whopping load more than advertised.

First, some figures to show the invariable tendency of the government to dramatically underestimate the cost of its own programs:

- 2009 (January) CBO estimated that the bailout TARP plan would cost taxpayers $189 billion; instead, several weeks later the estimated cost was raised to $356 billion, and will eventually be much more by end of 2009.

- 1965 CBO estimated that Medicare Pt. A cost would be $9 billion by 1990; instead the cost was $66 billion in 1990.  They were wrong by a mere 633%.  Today the costs have exploded so incredibly that no one’s even bothering to go back now and try to figure out just how terribly wrong the forecasters truly were.

1965 CBO estimated that all (Part A plus Part B) Medicare cost would be $12 billion by 1990; instead the cost was $107 billion in 1990, and today it has a stratospheric total unfunded liability of $61.6 trillion.  Oops.

1987 CBO estimated that subsidy for Medicaid special hospitals would be $100 million by 1992; instead the cost was $11 billion in 1992There’s a nice 10,900% cost markup for you.  Better luck next time.

1988 CBO estimated that Medicaid homecare cost would be $4 billion by 1983; instead the cost was $10 billion in 1983.  But don’t worry; it’s only money.  And being off by a mere 150% is actually quite excellent by the “close enough for government work” mindset.

2003 White House estimate of Iraq War cost would be $60 billion; instead the cost so far has exceeded $600 billion.  Oh, well, if at first you don’t succeed, there’s always Afghanistan to screw up too.

Maybe you’d better sit down for this shocker: The U.S. government controls its costs the way Monty Python’s famous Mr. Creosote controlled his weight:

And like Mr. Creosote, it will be that extra tiny little bit of spending that finally causes the U.S. treasury to explode in a gory death.  Instead of the mint that blows up Mr. Creosote, it will be a dollar bill that blows up the U.S. government.

So when you hear the arguments over how much Obama’s health care “reform” will cost, realize that it isn’t a matter of whether it will cost $1 trillion, or $1.5 trillion, or $3.5 trillion; it’s a matter of whether it will cost one of those numbers times a factor of at least 10 or more.

The $1.5 trillion figure, which is currently being thrown around, is enough of a sticker shocker even without the realization that it will actually end up costing far, far more that even Democrats – fearing losing their seats – are beginning to bail out of it.

Still, the worse the plan looks, the faster Barack Obama wants it passed, before people know what a lemon they bought.  Obama has been claiming that we must immediately pass health care “reform” in order to save money in future years.  He has pounded away with that message again and again.

But that message is a complete lie.

Allow me to introduce Doug Elmendorf, the director of the Congressional Budget Office.  And allow me to cite an article by Rick Moran from Pajama’s Media to describe the truly dire situation we face, and which we are ignoring to our literal peril:

ObamaCare Gets a Red Light from Congressional Budget Office

The Democrats’ plan not only won’t save a dime, it will cost us billions over the next decade. (Also see PJTV: Nationwide Protests Target ObamaCare)

Doug Elmendorf, director of the nonpartisan Congressional Budget Office, was testifying before the Senate Budget Committee yesterday when he dropped a bombshell on the gathering that put a whole new spin on the effort by the Obama administration to reform the health care system.

The exchange with Democrat Kent Conrad was a shocker:

Conrad: Dr. Elmendorf, I am going to really put you on the spot because we are in the middle of this health care debate, but it is 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?

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.

Conrad: So the cost curve in your judgment is being bent, but it is being bent the wrong way. Is that correct?

Elmendorf: The way I would put it is that the curve is being raised, so there is a justifiable focus on growth rates because of course it is the compounding of growth rates faster than the economy that leads to these unsustainable paths. But it is very hard to look out over a very long term and say very accurate things about growth rates. So most health experts that we talk with focus particularly on what is happening over the next 10 or 20 years, still a pretty long time period for projections, but focus on the next 10 or 20 years and look at whether efforts are being made that are bringing costs down or pushing costs up over that period.

As we wrote in our letter to you and Senator Gregg, the creation of a new subsidy for health insurance, which is a critical part of expanding health insurance coverage in our judgment, would by itself increase the federal responsibility for health care that raises federal spending on health care. It raises the amount of activity that is growing at this unsustainable rate and to offset that there has to be very substantial reductions in other parts of the federal commitment to health care, either on the tax revenue side through changes in the tax exclusion or on the spending side through reforms in Medicare and Medicaid.

Elmendorf made additional news yesterday by scaring the hell out of everyone when he released the latest CBO report on the long-term budget outlook that, in technical terms, says that we are in very big trouble:

Under current law, the federal budget is on an unsustainable path, because federal debt will continue to grow much faster than the economy over the long run. Although great uncertainty surrounds long-term fiscal projections, rising costs for health care and the aging of the population will cause federal spending to increase rapidly under any plausible scenario for current law. Unless revenues increase just as rapidly, the rise in spending will produce growing budget deficits. Large budget deficits would reduce national saving, leading to more borrowing from abroad and less domestic investment, which in turn would depress economic growth in the United States. Over time, accumulating debt would cause substantial harm to the economy. …

Measured relative to GDP, almost all of the projected growth in federal spending other than interest payments on the debt stems from the three largest entitlement programs — Medicare, Medicaid, and Social Security. For decades, spending on Medicare and Medicaid has been growing faster than the economy. CBO projects that if current laws do not change, federal spending on Medicare and Medicaid combined will grow from roughly 5 percent of GDP today to almost 10 percent by 2035. By 2080, the government would be spending almost as much, as a share of the economy, on just its two major health care programs as it has spent on all of its programs and services in recent years.

This double dose of doom has made absolutely no impact on Capitol Hill. Three House committees seem ready to report out a $1.5 trillion health care reform measure while the Senate Finance Committee appears close to a bipartisan deal on how to fund it — this, despite the fact that the CBO chief has told them there is no way to pay for it.

It is like being in a bad dream where there’s a fire in a room where a dinner party is being held and you’re the only one who notices. Everyone else is still playing cards, eating, or sitting around having witty conversations, all the while the fire laps closer and closer.

But it’s not a nightmare and lawmakers really are ignoring the fire. Elmendorf doesn’t come up with these projections to amuse himself and the wonks at CBO. He has outlined a recipe for catastrophe that will eventually make the United States a second rate economic power, not to mention impoverish the population.

The president and Democrats have been pitching this plan as a cost-saving measure. The president especially has been warning that we have to pass this reform bill quickly in order to get control of the spiraling deficits grimly outlined in Elmendorf’s long-term budget outlook.

But Elmendorf is saying that we can’t get there from here, that the numbers being used by Democrats to close the gap between what the bill will cost and how they plan to pay for it are simply not adding up.

There is another aspect to this reform measure that few are talking about: history. Every single entitlement program ever created by the federal government has cost the taxpayer more than advertised — in some cases, astronomically more.

Medicare is a perfect example. When the program was created in 1965, it cost taxpayers around $3 billion. At that time, the House Ways and Means Committee estimated that Medicare would cost $12 billion by 1990 — and that number was adjusted for a predicted rate of inflation. The actual cost of the program in 1990 was $107 billion. And today, Medicare costs the U.S. taxpayer $440 billion.

At best, Congress is guessing. The fact is, no one knows how much this monstrosity is going to cost, no one knows how it is going to be paid for, and no one knows what effect it will have on the quality of care or on the private insurance industry.

The ideas being implemented are untried. And, unlike NASA testing a new rocket or the Air Force testing a new fighter where failure is expected, there is no room for error. However this thing works itself out, we are stuck with it. History is a telling guide here as well; there has never been an entitlement once created that was later rescinded.

Elmendorf’s testimony and budget outlook should be heeded. Yes, we need to reform the health care system — badly. But the Democrats’ plan is not the only game in town. There are many proposals left unexamined by the Democrats in their haste to give their president a triumph. The partisan nature of the debate, the deliberate closing off of alternatives that would cost far less and perhaps do as much as is being proposed, and the damnable rush to get it all done before anything is digested or weighed against the long term, is frightening.

The major justification for speed in passing this legislation just went out the window with Director Elmendorf’s admission that the health care reform bill will only add many billions to the record deficits we will already be running over the next decade. Is that reason enough to slow down or even stop what the Congress is doing in order to think this thing through and try to come up with alternatives?

Not when it’s easier to ignore the fire lapping at your toes in order to grant a political victory to a president in trouble with the voters.

They say elections have consequences, and since the country voted for total Democrat control, we should let the Democrats have their shot.  That may be true.  But what we did as a nation in November was vote to slash our jugular veins, so that the blood of the entire nation (measured in the red ink of crippling debts) would gush out until we are left with less than a banana republic.

It is my sincerely held belief that those who truly understand the real picture are not telling us how truly bad things are, lest the people bring the nation down in one massively giant “bank run.”

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5 Responses to “Democrat’s Government Health Care Will Increase, NOT Decrease, Costs”

  1. Debt Solution Says:

    I really liked your blog! I have bookmarked it! Keep up the good work!

  2. bd Says:

    Why don’t you adjust for inflation in any of your figures? The original CBO estimate from 1965 of $9 Billion would equal around $38 Billion in 1990. Still off but not by a factor of ten like you claim. You also conviently exclude the fact that the program has expanded several times thorugh legislation (primarily the expansion pushed by Nixon) which the original CBO calculations could never predict. If the CBO stated that your car is speeding towards a wall and you have time to stop by applying the brakes now does it mean their orginal calculation was incorrect if someone else hits the accelerator?

  3. Michael Eden Says:

    I see you don’t know what you’re talking about in your second sentence: it wasn’t the CBO that provided these figures. The CBO didn’t exist yet. It was a congressional unit that was the predecessor to the CBO that did the calculations.

    Second, to the extent that you have any point, neither does today’s CBO when THEY project. Both outfits tried to take into account inflation when they make their projections.

    Does the CBO know how much inflation is going to rise in ten or twenty years right now? I hope you’re not so stupid as to think they do. In point of fact, many economists expect inflation to go up wildly, given the fact that we are at unprecedented debt levels. Is it your contention that the CBO has a time machine, and knows what inflation will be?

    I think your argument kind of goes to fertilizer on the “inflation” score.

    But let me move on to the next fertilizer argument, that the Medicare legislation was expanded. Democrats are ALREADY talking about the ObamaCare bill that was just passed being a foundation for more and more expansion. Which is to say that the costs are going to (to quote Obama) “necessarily skyrocket” beyond what the CBO said.

    Lastly, I am all in favor of hitting the brakes on our reckless and unsustainable spending, so your final analogy supports my position and undermines the Democrat position.

    Do you have any more fertilizer, bd?

  4. robert gentz Says:

    Social Security and Medicare are self funded. The Bible says to give unto Ceasar that which is Ceasars. The Social Security Trust Fund does not belong to Ceasae, the Federal Income Tax Withheld does. Social Security and Medicare did not invade Iraq and Afghanistan, the Federal Income Tax Withheld did. Why not put line items on the pay stubs to show how much of their tax money is going for the wars, defense, education and corporate welfare? The big one would be how much the ordinary working stiff is paying for the tax cuts for the top income people’s tax cuts. Especially CEO’s for cutting jobs and getting a bonus for improving the bottom line like they really earned it from good ol free market capitalism, the manufacturing and selling of commercial goods.

  5. Michael Eden Says:

    I think you’re confusing God with FDR, Robert.

    Social Security is a Ponzi scheme to the Nth degree. Eventually it will collapse and destroy us. There were something like 19 workers for every retiree when it was passed. And most of those workers died within only a few years of collecting benefits. Now it’s like 3 workers for every retiree. Like a Ponzi scheme, the early people get everything; but the people (like me) coming in at the end get the shaft.

    And excuse me for finding it immoral for you demanding that I pay all my life to finance your retirement for a program that I myself will never get to enjoy because of your greed.

    Walter Williams put it this way:

    Jagadeesh Gokhale, senior economic adviser, Federal Reserve Bank of Cleveland; and Laurence J. Kotlikoff, professor of Economics at Boston University document the looming Social Security and Medicare crises in “Is War Between Generations Inevitable?”. They report that “A male reaching 65 years of age today (in 2000, the year of their study) can expect to receive $71,000 more in government ‘transfer’ benefits (of all kinds at both the federal and state levels, but mainly from Social Security and Medicare) than he will pay in taxes (of all kinds at both the federal and state levels) before he dies. A 65-year-old female can expect a net gain of more than twice that amount; she can expect $163,000 more in benefits than she will pay in taxes.”

    The picture is not so rosy for people who entered the labor force in 2000. They will pay far more in taxes than they will receive from transfer programs. Expansion of elderly handouts, such as prescription drugs, will make things worse. “For example: A 20-year-old female can expect to pay $92,000 more in taxes than she will receive in transfer benefits over her lifetime. The future looks more than three times as bleak for her male cohort, who can expect to pay $312,000 more in taxes than he will ever receive in benefits.”

    Why is Social Security a better deal for today’s seniors? Just look at what they paid in. From 1937 to 1949, the maximum annual Social Security tax was $60. It remained under $200 until 1956. After 1956, Old Age, Survivors and Disability Insurance was added and in 1966, Medicare was added. It wasn’t until 1969 that maximum Social Security taxes exceeded $2,000. Today, the maximum annual Social Security tax is $13,000 and the maximum annual benefit is $25,000.

    As with any Ponzi scheme, the people who get on board early make out. This is pointed out by Geoffrey Kollmann and Dawn Nuschler of the Congressional Research Service in their report “Social Security Reform” (October 2002) They say, “Until recent years, Social Security recipients received more, often far more, than the value of the Social Security taxes they paid. … For example, for workers who earned average wages and retired in 1980 at age 65, it took 2.8 years to recover the value of the retirement portion of the combined employee and employer shares of their Social Security taxes plus interest. For their counterparts who retired at age 65 in 2002, it will take 16.9 years. For those retiring in 2020, it will take 20.9 years.” My question is: How can anyone who draws out every penny he’s put into Social Security in a few years say that he’s not living at the expense of another?

    In my opinion, it takes a special form of callousness and disregard for the welfare of future generations of Americans for today’s senior citizens to fight against reform.

    Along with Medicare, these two “entitlements” are responsible for an unfunded liability of more than $100 trillion. Are you going to pay that for us, Robert? That would be fair. What ISN’T fair is that you get to soak up all the benefits, and then force me to pay all the costs. For a program that will collapse before I retire. And then you give me a moral lecture on top of your theft?

    Already, these programs consume half the US budget, such that we cannot do anything else as a nation without incurring massive deficits. These programs are paralyzing us. Obama’s tax commission just pointed that out. And by 2050, these two programs alone will consume the ENTIRE US budget. And then it’s Dodo birdsville for the USA.

    Maybe The Social Security Trust Fund didn’t invade Iraq and Afghanistan, but the guy who imposed it on us locked up American citizens of Japanese and German heritage while fighting a war he promised the American people he would keep us out of.

    And for the record, let me also point out that you proceed to do a bait and switch. I wasn’t writing about Social Security; I was writing about ObamaCare.

    You proceed to chastise me all about SSI as though you were correcting my article on ObamaCare.

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