If you haven’t already read Yuval’s lucid piece on the strange absence at the heart of the debt ceiling debate, I hope you’ll give it your time and attention. Here is an excerpt:
In the short-term debate we are now engaged in, we are fighting about ways to reduce deficits with lower discretionary spending or higher taxes—basically using non-health spending to offset some of the growth in health spending in the hope of keeping overall deficits and debt under control for a little while longer. But in the medium and long term, there is no hope whatsoever of doing this. It is absolutely impossible to raise taxes fast enough or high enough to keep up with this growth, and while other entitlement and discretionary cuts can buy a little time there is really nothing we could do on that front that would effectively avert disaster, both for the health-entitlement programs and for the economy. As President Obama himself said earlier this month, “If you look at the numbers, then Medicare in particular will run out of money and we will not be able to sustain that program no matter how much taxes go up.”
Unfortunately, however, the president is not willing to do anything about this. The Medicare reforms he was reportedly willing to consider—raising the Medicare retirement age by two years, employing yet more price controls, a little more means testing—just don’t get anywhere near the real problem. Taking the two healthiest age cohorts out of an expensive insurance system doesn’t save you real money—CBO says raising the Medicare age to 67 would only reduce the program’s spending by 2 percent over ten years, since Medicare won’t be spending its trillions on 66-year-olds. Price controls are the problem, not the solution—they drive doctors to segment their work and provide more services rather than higher quality. The president’s notion of means testing just involves slightly higher premiums in Medicare parts B and D for wealthy seniors—that is, higher taxes rather than a change in how the system works, and by the White House’s own admission this would save almost nothing.
Our debt explosion is a health-entitlement explosion, and to address it we have to fix the fundamental structure of our health entitlements.
Defenders of the White House will presumably argue that PPACA was devoted to cost control as well as coverage expansion. My sense is that PPACA may well exacerbate cost growth, e.g., it is easy to imagine that one of its main cost control levers, encouraging a narrowly prescribed form of provider integration, will result in cost shifting.