Tuesday, March 23, 2010

Fiscal Analysis of the New Health Care Bill

Okay, now that that title has driven everybody away, for those of you brave enough to stick around, what I have is based on a reasonably quick message exchange that Phil Gaven and I had earlier today in which he asked a genuine question about the new bill, and in which I tried to give a genuine answer. He thought it was worth sharing with folks. I think nobody in their right mind wants to hear another word about health care, yet here it is, cluttering up the blog when I could be writing beagle haiku.

Due to the vast cloud of misinformation around the thing, I freely grant that my answer is not 100% vetted by a full reading of the bill, the sidecar, or the Congressional Budget Office (CBO)study. Mostly, it's just built out of the few pieces of information I came across in the past few days that I felt could be deemed "probably truthful."

Phil: How can a health care bill that costs $900 billion also reduce the deficit by $130 billion?

John: By presenting the CBO with a plan that includes $500 billion in cost reduction and $630 billion in new revenues. As near as I can tell there's also a bit of fiscal chicanery that shifts some revenues forward and some costs out of the ten year window, though at this point I don't really trust *anybody's* evaluation of the numbers. The CBO conducts its analysis strictly on what's in the bill, not on a guess as to what changes may happen over the next ten years.

The real question is whether or not the cost reductions and new revenues will happen. On the bright side, as near as I can tell, the cost for bringing 40 million people into the system is less than might be expected because those 40 million people have already been getting medical care, usually on a crisis basis with the costs spread to all of those who are already insured.

And even slowing the growth of health-care costs by a couple of percentage points will make a big difference ten years from now. It would be hard to overstate the growing economic disaster that has been our health care system for the last thirty years.

My best analysis is that at its heart this was a public utility reform bill. That's the best analog I can come up with for regulating a vital service that's provided through an assortment of local for-profit monopolies.

As for how the numbers will really play out in ten years? My guess is that it's anybody's guess.

Really, though, this health care hubbub was a pimple on the butt of the coming deficit disaster that's been caused by the Baby Boomers deciding to fund their approaching and ever-expanding Social Security and Medicaid benefits through a series of tax cuts. That's the thing that really needs to be fixed.


  1. John, you do have a lovely way of cutting to the chase.

    Well explained. Thanks! And that last thought, disconcerting though it is, is well worth pointing out and highlighting.

  2. Can we have Beagle-and-health-care haiku please? I'm kind of missing MCD's Colts-Beagle hiaku...Is there no baseball team out her way that might fill the spring-summer season?

  3. A health care-slash- beagle haiku sounds like its for the cutting edge market.