The Health Care Conundrum: A $1.4 Trillion Problem

Strategic Insights -

The White House's health care reform plan is facing stiff opposition, with critics arguing that the plan's premise is contradictory - reducing government health spending while adding millions of Americans to government health care rolls. This paradox can't be reconciled, as providing more health care costs more money. Vice President Joseph R. Biden Jr. suggests that "we've got to spend money to keep from going bankrupt." While acknowledging the need to address rising health care costs, the Obama administration's plan pours gasoline on the fire by increasing health spending by approximately $1 trillion in the first decade, and perhaps $2 trillion in the second decade.

Key Takeaways:

  • The federal Medicare and Medicaid costs have doubled to 6.3 percent of the gross domestic product (GDP) since 1990, and are projected to push federal health spending to 16.6 percent of GDP by 2050.
  • The Lewin Group estimates that 88 million Americans would lose their employer-based coverage and be forced into a government health plan.
  • The House plan would increase health spending by approximately $1 trillion in the first decade, and perhaps $2 trillion in the second decade.
  • The Lewin Group calculates that 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 stated that the health care cost curve is being raised, and the legislation significantly expands the federal responsibility for health care costs.
  • The House bill would impose an income surtax of up to 5.4 percent on millions of upper-income families and small businesses, with a top income-tax rate of 52 percent, higher than nearly all of Europe.

Statistics:

  • Since 1990, federal Medicare and Medicaid costs have doubled to 6.3 percent of the gross domestic product (GDP), and are projected to push federal health spending to 16.6 percent of GDP by 2050.
  • Medicare and Medicaid costs are projected to increase by $1.44 trillion ($12,000 per household) annually, from 10.3 percent of GDP cost increase today.
  • The Lewin Group estimates that 88 million Americans would lose their employer-based coverage and be forced into a government health plan.
  • The House plan would increase health spending by approximately $1 trillion in the first decade, and perhaps $2 trillion in the second decade.
  • The Lewin Group calculates that 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) estimates that the House plan would run a $239 billion deficit through 2019, and a second-decade deficit around $800 billion.

Sources:

  • Satirist P.J. O'Rourke's quote, no date provided
  • "If you think health care is expensive now, wait until you see what it costs when it's free."
  • Brian M. Riedl, SPECIAL TO THE WASHINGTON TIMES, August 2009
  • President Obama's health care reform plan, 2009
  • Vice President Joseph R. Biden Jr., no date provided, quote from Brian M. Riedl's article
  • Lewin Group estimates, no date provided
  • Congressional Budget Office (CBO) Director Doug Elmendorf, Senate Budget Committee testimony, no date provided
  • Congressional Budget Office (CBO) estimates, no date provided
  • The Heritage Foundation, no date provided, about the author and the article