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Wishful Thinking, Not a Plan



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OMB director Peter Orszag continues to talk as if the Obama administration has presented a credible plan to control health-care costs in their push for expanded coverage.

Today, in a new post at OMB’s website, Orszag again highlights for his readers how great things would be if, in fact, health-care costs slowed down. And, of course, it’s true, if Medicare and Medicaid spending suddenly grew at rates that were 0.5, 1.0, or 1.5 percentage points below historical trends then, yes, our fiscal position would improve dramatically over time.

But there’s just one small problem here. There is no plan to do any such thing. 

Congress is working on a health-care bill to expand coverage mainly by subsidizing insurance for tens of millions of households. This new entitlement is likely to cost $150 billion per year initially and grow, on a per capita basis, at a rate that is about 2 percentage points above GDP growth each year going forward. In other words, the cost of this new program will rise just as rapidly as Medicare and Medicaid spending has for decades now.

Orszag and others are saying, don’t worry, health-information technology, comparative-effectiveness research, more attention to prevention and wellness, and some very modest provider payment reforms in Medicare will make all of this governmental spending — on Medicare, Medicaid, and the new subsidy program — grow much more slowly in the future than it has in the past.

But this is an assertion — not a fact. Where’s the evidence to back it up?

If the Orszag cost-control plan would really do something to slow the pace of rising costs, it’s within his power to prove it. He can ask the actuaries who do the Medicare and Medicaid projections for the administration to certify his claim.

But we haven’t seen anything from the actuaries because they are probably just as skeptical as their counterparts at the Congressional Budget Office (CBO). CBO officials have already said — numerous times — that the kinds of reforms Orszag likes to cite as the answers to all problems are highly unlikely to do much of anything. What’s needed is much more fundamental change in the financial incentives for consumers and suppliers of medical services — the kinds of changes that would be controversial and therefore haven’t been taken up by the Obama administration or Democratic leaders in Congress.

The president himself has said that we are headed toward a fiscal crisis if we don’t take action to control entitlement spending. And, yet, his administration is pushing Congress to pass the largest entitlement expansion since 1965 based on a cost-control “plan” that amounts to not much more than a lot of wishful thinking. At this moment in our history, it’s hard to think of anything more dangerous than that.



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