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As featured on p. 218 of "Bloggers on the Bus," under the name "a MyDD blogger."

Thursday, May 28, 2009

The Cost Of Doing Nothing

I'll probably have a blizzard of health care stories up today, because there's a lot I want to highlight that I've seen over the last week. Most important, we're finally seeing some critical mass about the cost of inaction. That's always hard to quantify. The Congressional Budget Office doesn't score "do nothing" side-by-side with the policy at hand. But advocacy groups and even the media are starting to make noise about how the status quo would have real, definable costs.

First, Families USA today released a report about the hidden tax, the amount of money that insured Americans pay for uninsured Americans to receive emergency room treatment.

During 2007 and 2008, one out of every three non-elderly Americans—86.7 million people—went without health insurance for some period of time.1 When those who do not have health insurance get sick, their first response is often to avoid or delay seeking care due to the cost.

When the uninsured do obtain care, they struggle to pay as much as they can afford. Often, however, the uninsured cannot afford to pay the entire bill, and a portion of it goes uncompensated. To make up for these uncompensated care costs, doctors and hospitals charge insurers more for the services provided to patients who do have health coverage. In turn, the costs that are shifted to insurers are passed on in the form of higher premiums to consumers and businesses that purchase health coverage.


It turns out that American families pay about $1,017 each on this hidden tax, which would be mostly wiped away by reforms that would cover almost everyone. By the way, this is why I support extending coverage to everyone in America, because leaving any group out would keep the hidden tax in play. So-called "illegal immigrants" get sick too, and someone picks up the tab.

The Urban Institute did a study on cost increases over the next ten years in the absence of reform.

They find that, absent reform, individual and family spending on health care (the sum of insurance premiums and out-of-pocket costs) will rise approximately 40% per capita under a best case scenario of low unemployment and economic growth.

Under an intermediate or worst case scenario (in which fewer workers have jobs and comprehensive insurance, more uninsured burden the system, and health care costs continue to spiral upwards), they project individual and family spending on health care to increase 50% in an intermediate case scenario or almost 60% in their worst case scenario.


That would be just an enormous burden, especially on those making under the median income. But the costs borne by the individual are just as bad as the costs borne by the state. Without reform, 26% of total GDP, or $9 TRILLION dollars, would be spent by Americans and the government on health care alone. Now Mickey Kaus might think that's just swell, but he isn't much of a budgeter, since that expanse of funds devoted to health care would simply break the budget entirely. The government actually does other things, but if health care grows 10 times as large as defense, it would have no ability to do much else.

This is why, as Steven Pearlstein put it in an excellent column, those who use the budget to argue AGAINST health care reform are arguing in the opposite direction from reality.

The biggest threat from this budgetary obsession is likely to come up in the debate over health-care reform. Under pressure from budget scolds, Congress and the administration have agreed that any plan to extend health care to 47 million uninsured Americans and reform a $2.6 trillion industry will be "budget neutral" within the first five years after enactment.

There is, for example, general agreement that it will cost $100 billion to $150 billion a year to provide the subsidies necessary to allow all Americans to afford a basic health plan. But the Congressional Budget Office, the official scorekeeper on these matters, has been reluctant to certify the major cost savings that might come from various proposals to restructure the health delivery system, or reform the health insurance market to make it more competitive, or change the way doctors and hospitals are compensated so they have the incentive to use only the most cost-effective treatments.

It is, of course, the CBO's job to be skeptical, particularly after a number of past experiments in this area have yielded disappointing results. But it is also true that because nothing of this scale and complexity has been tried before, projecting the fiscal impact is next to impossible. This budgetary standoff will leave Congress with no choice but to try to finance its health-reform efforts by raising taxes or limiting payments to doctors and hospitals, possibly jeopardizing the entire project.

We can certainly applaud policymakers for their reluctance to enact another expensive and popular entitlement program without finding the money to pay for it. But it is folly for them to put themselves in a political and procedural straitjacket. In all of history, no revolution was ever made by budget analysts. Health reform requires leaders with the foresight and confidence to take a leap into the unknown.


There are ways to finance universal health care, though many have different beliefs on the most cost-effective or sensible. But one thing is clear - financing it 10 years from now would be a near-impossibility.

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