American Elephants

A Little History of Health Care Cost Estimates and Actual Results. by The Elephant's Child
October 27, 2009, 12:46 am
Filed under: Economy, Health Care, Law, Politics | Tags: , ,

Let’s start with the fact that the Democrats want single-payer, government-run health care.  I cannot fathom why they think this would be a good idea, since it has proved so damaging everywhere else.  Damaging to the economy, damaging to the patients who depend on it, and damaging to the medical system itself, and damaging to the society.

But Democrats (Liberals/ Progressives) believe in their good intentions, are uninterested in studies, experience or history, and don’t care much about consequences.  That’s why when they are in pursuit of their enlightened aims, their claims get more and more preposterous.

Washington has just run a $1.4 trillion budget deficit for fiscal 2009three times the deficit in 2008 under the evil George W. Bush.  And we have just been told that a new health-care entitlement will reduce the red ink by $81 billion over ten years.

The theory is that a more involved federal role by those brilliant folks in Congress will restrain costs and thus make health care more affordable.  Stop laughing, it isn’t funny.

Before the creation of Medicare and Medicaid in 1965, health care inflation ran only slightly faster than overall inflation.  In the years since, medical inflation has increased 2.3 times faster than inflation in the regular economy.  Much of this represents advances in technology and new treatments, but the idea of government as thrifty is plain silly.

The Wall Street Journal examined the record of Congressional forecasters in predicting costs.

ED-AK368_1healt_D_20091019182913The record is not good.  Most government programs cost far more than they were estimated to cost, and of course Congress usually cannot keep their hands off and continually tinkers.

The $81 billion “reduction” in cost came from the CBO estimate applied to the Baucus bill which existed only as a bunch of concepts.  We need a good  CBO estimate of whatever they have added in the back room, behind closed doors.  Whatever the estimate, history tells us that it will cost far more.

You will notice that only George Bush’s Prescription Drug benefit came in under predicted cost, but I have read that the Democrats are anxious to fill in the “donut hole” which was the device that brought the program in under estimates, along with greater use of generics, and lower participation by seniors.

Peter Orzag , now White House Budget Director, told Congress when he ran the Congressional Budget Office that the “primary cause” of the 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.” Competition?  Who knew! The Centers for Medicare and Medicaid Services agreed, adding that when given choices “beneficiaries have overwhelmingly selected less costly drug plans.”

There is a lesson there, but apparently no one is paying attention.

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