Democrats' Health Care Plan Is True 'Voodoo Economics'

The Washington Times (Washington, DC), August 4, 2009 | Go to article overview

Democrats' Health Care Plan Is True 'Voodoo Economics'


Byline: Brian M. Riedl, SPECIAL TO THE WASHINGTON TIMES

Satirist P.J. O'Rourke once noted, If you think health care is expensive now, wait until you see what it costs when it's free.

President Obama's health care reform is on life-support because it is premised on this very contradiction: It is not possible to simultaneously reduce government health spending and add millions of Americans to government health care rolls. After all, providing more health care costs more money.

Ironically, many of the same people who use voodoo economics to describe the idea that lower tax rates can increase revenues are effectively practicing their own voodoo economics by asserting that, in the words of Vice President Joseph R. Biden Jr., We've got to spend money to keep from going bankrupt.

The White House is correct that government health care costs are trending toward bankruptcy. Since 1990, federal Medicare and Medicaid costs have doubled to 6.3 percent of the gross domestic product (GDP), and Medicaid also threatens to bankrupt states. Rising health care costs and 77 million retiring baby boomers are projected to push federal health spending to 16.6 percent of GDP by 2050. To put that in context, this 10.3 percent of GDP cost increase today would come to $1.44 trillion ($12,000 per household) annually.

Health reform must reduce these costs, Mr. Obama says.

Yet rather than restrain health spending, the Democratic health plans pour gasoline on the fire. The House plan would increase health spending by approximately $1 trillion in the first decade, and perhaps $2 trillion in the second decade. Millions of Americans would be moved into either a failed Medicaid system, or a government health plan that would likely receive taxpayer subsidies in order to undercut private health plans.

The Lewin Group estimates that 88 million Americans would lose their employer-based coverage and be forced into this government plan. This would add trillions more in federal costs, not necessarily all of which would be financed by employer pay or play premiums.

Nor would this increased government spending reduce private health care costs, which are expected to double to 21 percent of GDP by 2050. Despite the president's proclamation that we can cut the average family's premium by about $2,500 per year, the Lewin Group calculates the House bill will add $460 annually to the average health plan as Washington shifts many of its own health costs onto private health plans.

Congressional Budget Office (CBO) Director Doug Elmendorf recently told the Senate Budget Committee, The way I would put it is that the [health care cost] curve is being raised. He also noted that the legislation significantly expands the federal responsibility for health care costs.

After abandoning the idea of scaling back runaway health care spending, Mr.

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Democrats' Health Care Plan Is True 'Voodoo Economics'
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