Posts Tagged ‘1965’

Don’t Think ObamaCare Won’t Be A Giant Black Hole Of Debt

October 27, 2009

You will be hearing about the Democrats “paying” for their health care takeover.  Don’t believe it.  Again and again and again, Democrats have sold one health care boondoggle after another, claiming that it will “only” cost such-and-so.  They have a perfect track record — of failure to live up to their claims.

Health Costs and History
Government programs always exceed their spending estimates.

Washington has just run a $1.4 trillion budget deficit for fiscal 2009, even as we are told a new health-care entitlement will reduce red ink by $81 billion over 10 years. To believe that fantastic claim, you have to ignore everything we know about Washington and the history of government health-care programs. For the record, we decided to take a look at how previous federal forecasts matched what later happened. It isn’t pretty.

Let’s start with the claim that a more pervasive federal role will restrain costs and thus make health care more affordable. We know that over the past four decades precisely the opposite has occurred. Prior to the creation of Medicare and Medicaid in 1965, health-care inflation ran slightly faster than overall inflation. In the years since, medical inflation has climbed 2.3 times faster than cost increases elsewhere in the economy. Much of this reflects advances in technology and expensive treatments, but the contrast does contradict the claim of government as a benign cost saver.

Next let’s examine the record of Congressional forecasters in predicting costs.  Start with Medicaid, the joint state-federal program for the poor. The House Ways and Means Committee estimated that its first-year costs would be $238 million. Instead it hit more than $1 billion, and costs have kept climbing.

Thanks in part to expansions promoted by California’s Henry Waxman, a principal author of the current House bill, Medicaid now costs 37 times more than it did when it was launched—after adjusting for inflation. Its current cost is $251 billion, up 24.7% or $50 billion in fiscal 2009 alone, and that’s before the health-care bill covers millions of new beneficiaries.

Medicare has a similar record. In 1965, Congressional budgeters said that it would cost $12 billion in 1990. Its actual cost that year was $90 billion. Whoops.  The hospitalization program alone was supposed to cost $9 billion but wound up costing $67 billion.  These aren’t small forecasting errors. The rate of increase in Medicare spending has outpaced overall inflation in nearly every year (up 9.8% in 2009), so a program that began at $4 billion now costs $428 billion.

The Medicare program for renal disease was originally estimated in 1973 to cover 11,000 participants. Today it covers 395,000, at a cost of $22 billion. The 1988 Medicare home-care benefit was supposed to cost $4 billion by 1993, but the actual cost was $10 billion, because many more people participated than expected. This is nearly always the case with government programs because their entitlement nature—accepting everyone who meets the age or income limits—means there’s no fixed annual budget.

One of the few health-care entitlements that has come in well below the original estimate is the 2003 Medicare prescription drug bill. Those costs are now about one-third below the original projections, according to the Medicare actuaries. Part of the reason is lower than expected participation by seniors and savings from generic drugs.

But as White House budget director Peter Orszag told Congress when he ran the Congressional Budget Office, the “primary cause” of these cost savings is that “the pricing is coming in better than anticipated, and that is likely a reflection of the competition that’s occurring in the private market.” The Centers for Medicare and Medicaid Services agrees, stating that “the drug plans competing for Medicare beneficiaries have been able to establish greater than expected savings from aggressive price negotiation.” It adds that when given choices “beneficiaries have overwhelmingly selected less costly drug plans.”

Yet liberal Democrats fought that private-competition model (preferring government drug price controls), just as they are trying to prevent private health plans from competing across state borders now.

The lesson here is that spending on nearly all federal benefit programs grows relentlessly once they are established. This history won’t stop Democrats bent on ramming their entitlement into law. But every Member who votes for it is guaranteeing larger deficits and higher taxes far into the future. Count on it.

You should notice the bit about the prescription drug benefit passed under Bush, because Democrats have routinely demonized it.  They claim that Republicans didn’t even TRY to pay for it, but merely increased the deficit.  That is for the most part true, but at least it a) relied upon the private sector to provide the benefit, and b) didn’t socialize the entire economy in the process.  Democrats argue that, unlike Republicans with the prescription drug benefit, they are trying to “pay” for their plan.  Just as right now I am flapping my arms and trying to fly out of my chair.

As much as Democrats want to demonize the Bush prescription drug benefit, it remains the anomaly as being the ONLY government health care program that ran under budget, as opposed to ten times budget.

We can’t allow the Medicare system to collapse, as it is on the verge of doing.  Too many elderly people who don’t have recourse to anything else are counting on it.  But the gigantic hole of red ink is proof that we never should have started this program until we truly counted the cost.  Had the government not foisted Medicare upon us, the private market would have solved the problem better.

Anybody who thinks we can save one giant government program by creating an even more giant government program is a fool.  It is the mindset of one who believes the best way to get out of a hole is to dig deeper and faster.

The health care plan that the Democrats are envisioning will be a FAR greater black hole of debt than anything this country has ever seen.  Because it is FAR more ambitious, involves FAR more people, and involves a FAR greater takeover of the US economy.

And, incredibly, the Democrats are literally using the argument of the skyrocketing deficit to enact something that will massively increase our deficits.

Their mindset is the same mindset that deals with our exploding debts by constantly raising the debt ceiling so we can keep on borrowing and borrowing and borrowing.  That fixes the problem, doesn’t it?

We are facing the largest federal deficits since World War II.  That should really scare you, because in World War II, it was AMERICANS who held that debt by purchasing war bonds.  Back then, Americans actually saved their money.  Quite different from these days, when we routinely go into debt to buy a lot of crap that we don’t need.  Today it is CHINA who holds our debt.  So as we begin to contemplate the $800 billion a year in interest payments that we will soon be paying, we realize that we are no longer our own masters.

If that isn’t bad enough, consider this: at the end of World War II, the United States had the greatest manufacturing and industrial base the world had ever seen.  Today, we have only a tiny fraction of that former capability.  In addition to being a debtor nation, we are also a “service” nation.  You don’t spend your way out of debt; you don’t even service your way out of debt.  You produce your way out of debt.  We have long since lost the capability to do that.

Finally, the debts accrued during World War II were debts that were a) necessary and b) temporary.  That, also, is no longer true today.  Our World War II debts were the result of our war of necessity against the greatest evil humankind had ever seen; the debts we are experiencing today are the result of our war against our children’s children’s children’s children’s children’s children as we demand more and more benefits at somebody’s else’s expense.

As a result of American power following World War II, the U.S. dollar became the fundamental world currency, and English became the official lingua franca of the global economy.  Tragically, as a result of the rapid American collapse, the U.S. dollar is now on the verge of being expunged from the global stage, and English is increasingly not being spoken even in America.


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