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View related content: Health Care
You know, if the Democrats want the government to take over American healthcare, they actually have a simpler option than passing legislation through Congress. They can just do nothing. The government is taking over all by itself.
In the United States, government pays the health costs of the retired (through Medicare), the poor (through Medicaid), lower-income young people (through a program called S-Chip), plus federal employees, veterans and native Americans.
On Thursday, the U.S. government’s main source of health statistics, the federal Centers for Medicare and Medicaid Services, released an amazing statistic: Together, federal and state health care programs now spend more on health than the private U.S. economy. In other words, the U.S. health system is now majority government funded. On its present course, the government share will grow even faster after 2015, as the Baby Boomers qualify for Medicaid.
More bad news: The U.S. health system, already far and away the most expensive on Earth, has taken another terrible cost jump. In 2009, Americans spent a total of 17.3% of national income on health care, up from 16.2% in 2008. Most other advanced countries spend between 8% and 11%. Second-place Switzerland spends about 11.5%.
These numbers bounce off the head, I know. So here are some comparisons.
If U.S. health-care costs dropped to Swiss levels, it would be as if the United States suddenly got its entire military budget for free, with enough change to equal the entire economy of South Africa.
If U.S. health-care costs dropped to Swiss levels, the U.S. budget deficit would vanish as soon as the U.S. economy emerged from recession.
If U.S. health-care costs dropped to Swiss levels, the United States could afford to cut income tax rates by 80% or abolish its entire Social Security payroll tax system.
We’re talking real money here!
The latest cost surge is partly attributable to recession: U.S. GDP dropped in 2009, so even if health-care spending had held constant, the health share would have grown. But health care spending did not hold constant. In a year when spending on virtually everything else dropped, health care spending rose by $134 billion.
Barack Obama advertised his health-care reforms by promising to hold the line on costs. Conservatives and Republicans reacted with skepticism to those promises, and reasonably so. But not all the Obama cost-control proposals were self-evidently futile. On Nov. 17, 23 distinguished economists published an open letter that hailed key features of the Senate health bill as likely to “lower health-care costs and help reduce deficits over the long term.” Among the signatories: Mark McClellan, a political appointee who ran the Centers for Medicare and Medicaid under George W. Bush.
If health-care reform languishes, it’s hard to see much near-term hope for rational cost control. This week, one of the brainiest congressional Republicans, Paul Ryan of Wisconsin, proposed a budget reform that would cap federal Medicare spending for future retirees. If adopted, this measure would slow the growth of government health-care spending–but only by shifting costs onto seniors themselves. It would not address the underlying causes of health-care inflation in the United States.
But of course the Ryan plan will not be adopted. Seniors would never stand for it. So what is likely to happen instead is that the big government health care programs will grow and grow and grow.
Unaddressed, health-care costs are projected to reach 20% of GDP by 2020, or almost twice as much as is spent in the other advanced countries, with the majority of that money spent by government.
In certain significant respects, U.S. health care is better than healthcare elsewhere. But it’s not twice as good, nothing like it. Yet by the end of this decade, it could cost twice as much. If so, it’s hard to see how the United States can ever again afford a tax cut. It’s hard to see how the country can avoid pressure to cut military spending.
Republicans had a lot not to like about the Democrats’ health plans, especially the now-abandoned “public option”: direct government insurance for working-age people. Likewise, Republicans had endured years of Medicare demagoguery from Democrats: It was too tempting to resist returning the favour when finally a Democrat undertook to slow Medicare’s growth.
All the same: As a future Republican president or Republican Congress struggles with health care costs a decade from now, he or she or they may well look back on 2009 as an opportunity thrown away–a chance to hold the line on health costs and let the Democrats take the blame.
Someday, conservatives may look back on health care and wistfully regret: “That would have been a very good fight to lose.”
David Frum is a resident fellow at AEI.
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