Politics & Policy

The High Cost of ObamaCare

Americans wisely rejected HillaryCare. ObamaCare is the same poison, different bottle.

President Obama spoke to the American Medical Association yesterday and repeated the same platitudes and promises he has been uttering ever since the presidential campaign. What he did not explain, however, is how he intends to square the circle of providing universal, top-quality health care for everyone without imposing health-care rationing, without raising taxes on the middle class, and without blowing another trillion-dollar hole in the budget.

He did not explain it because he can’t. That circle cannot be squared; it’s a logical impossibility. Couldn’t be done by Hillary; can’t be done by Obama.

Americans must understand: ObamaCare equals HillaryCare; same poison, different bottle.

Back when HillaryCare was under consideration by Congress, I was minority staff director of the congressional Joint Economic Committee. I co-authored a report titled A Billion Dollars a Day,” referring to the true cost (i.e., after all the unrealistic assumptions were discounted) of President Clinton’s plan to nationalize health care and turn it over to Hillary to run. Congress rejected HillaryCare, in part because the price tag was so astronomical.

Fifteen years later, a new president and a new Congress, this one controlled by the president’s party, are trying once again to turn health care over to the government to run.

Depending upon which estimate one accepts, the Obama program is projected to cost between $1 trillion and $1.5 trillion during the first ten years of operation. That works out to an average annual cost of $100 billion to $150 billion, or somewhere between $274 million and $411 million a day.

What’s wrong with this picture? The Obama administration has set its aim just as high as the Clinton administration, and yet this estimate is only 27 percent to 41 percent of what we projected HillaryCare would cost. The Obama figure is even more eye-popping when one factors in the inflation we have had in the intervening 15 years.

According to the special Consumer Price Index that measures medical inflation, the cost of health care has gone up by 80 percent since HillaryCare was on the table. The billion dollars a day our report projected in 1993 would amount to $1.8 billion a day in 2009, or $658 billion a year — $6.6 trillion for the first decade. And that does not take population growth into consideration.

How on earth can the Obama administration claim it is going to restrain the cost of nationalizing 17 percent of the U.S. economy? First, much of the increased cost will be forced on workers and their employers surreptitiously through mandates and regulations that keep the cost from showing up in the federal budget — call it AIG accounting.

Second, administration officials speak sonorously of “cost control.” One of the “cost-containment” schemes the president spent a lot of time talking about in his AMA speech is centralizing and computerizing health information. Yet, the Congressional Budget Office (CBO) has estimated that health-information technology as provided for in the recently enacted stimulus bill would reduce health-care spending by only about 0.3 percent. Therefore, the main source of cost savings will have to be direct rationing of health care through an innocuous-sounding concept called “comparative effectiveness research” — which will allow bureaucrats to delay and deny care on the grounds it is not “effective” — and indirect rationing through squeezing the reimbursement of doctors and hospitals.

One thing we learned from the Medicare experience is that the original estimates of radical new government programs are vastly understated because of government’s inability to control program costs and the impossibility of imposing price controls (by whatever name) on an entire economy-wide industry. But price controls and spending caps it will be, just as it would have been with HillaryCare, followed by health-care rationing, just as it has been with Medicare. And although these bureaucratic machinations will harm people, they won’t appreciably hold down costs.

At its inception in 1966, Medicare cost $3 billion a year. At that time, the Ways and Means Committee of the U.S. House of Representatives projected “conservatively” that the program would cost approximately $12 billion a year by 1990. In 1990, the cost of Medicare was actually $107 billion — nine times greater than the Ways and Means estimate.

One might argue that no matter the price tag, it would be worth it to achieve universal health-care coverage. But will Obama & Co. actually achieve this Holy Grail? Not even close. According to the CBO, even assuming Congress enacts an individual health-care mandate (i.e., a requirement that everybody in the United States obtain insurance), somewhere between a fourth and a third of the uninsured still would not have coverage.

It may be impossible to project the cost of next-gen HillaryCare with precision (although I am willing to bet it will come in at about a trillion dollars a year). But one thing we can say with confidence is that the Obama administration’s current estimates are so far askew from historical experience, so at variance with past estimates for similar programs, and based on so many dodgy assumptions that they are quite simply unbelievable.

– Lawrence A. Hunter is former staff director of the congressional Joint Economic Committee and currently a senior fellow at Americans for Prosperity and president of the Social Security Institute.  

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