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BUTLER: Bank the bucks first

- The Washington Times - Thursday, October 8, 2009

OPINION/ANALYSIS:

A classic "Saturday Night Live" skit sums up much of what's wrong with the financing part of health care reform and gives a clue how to fix it.

At a typical kitchen table, debt-burdened Steve Martin and Amy Poehler are trying to figure out their finances. Suddenly, a salesman shows up with the solution: a book titled "Don't Buy Stuff You Cannot Afford." Its message: Save money first, then buy things.

This concept totally confuses dim-bulb husband Martin.

Congress evidently has not seen the skit. Doubtless it would find the book's premise just as confusing as Mr. Martin found it. After all, Congress for years has been piling up a credit card debt of more than $50 trillion to "pay" for the entitlement benefit promises it has made. It has run up a $37 trillion debt for Medicare alone. It's debt that taxpayers will have to pay off in the future, and it works out to $185,000 for every man, woman and child in the United States today.

Congress is currently pondering how to afford a huge new health program for the uninsured that will cost about $1 trillion in just the next 10 years. Its cost - and the resultant debt - will only accelerate after that.

Some congressional leaders want to pay for much of the new entitlement the old fashioned way - simply by ringing up more debt. They would add to the national credit card the way Mr. Martin would understand. And they would cover much of the rest by raising taxes.

But wait! Maybe some of our leaders, including President Obama, have seen the skit after all. If they can't get Americans to accept enough new taxes, Mr. Obama pledges to pay for "every dime" of the rest with savings from the Medicare program.

Yet why Medicare? That program is already deep in a financial hole. "Paying for" new coverage partly with Medicare savings is like reducing your MasterCard payments so you can cover the first few minimum payments on your new Visa card and head off to Bloomies.

There should be one cardinal principle in the health reform debate: Any savings from Medicare should be used only to sustain that program and reduce the debt it has already racked up for future generations. Not one dime should go to cross-subsidizing a new entitlement.

But let's look even more closely. As Mr. Martin says sarcastically to the book salesman, "And where do you get this 'saved' money?"

The answer seems to be through the same kinds of "delivery system reforms" and cuts to physician payments that Congress has often promised in the past but invariably failed to deliver. Or as Mr. Martin puts it, "I think I've got it. I buy something I want and then hope I can pay for it. Right?"

Right, unfortunately. For years, Congress has forecast Medicare physician fee cuts into the budget, only to have the cuts eliminated under lobbying pressure from the physicians. Similarly, significant changes in the way we organize health, supposedly leading to big savings, regularly grind to a halt when both health providers and patients take issue with those changes. The predicted savings never materialize.

It is time Washington stopped spending fantasy savings. Instead lawmakers should apply the "Don't Buy Stuff You Cannot Afford" principle to health reform, and indeed to any proposed federal spending "paid for" with supposed savings.

Let's apply a "Bank the Bucks First" requirement to any such proposal, starting with health reform legislation. Here's how it would work.

If an expansion of, say, subsidies for health care coverage were to be financed by savings in other programs, then those subsidies could only be sent out from Washington once the savings were actually achieved and "banked" upfront.

No savings? No spending. Half the savings? Half the spending. Eligibility for benefits would automatically be adjusted accordingly. This could be done on a year-to-year basis, with the rule that spending for the next year is permissible only if the previous year's savings have materialized.

Who should get to certify the savings are real and have been banked? Certainly not Congress itself, which could make Bernie Madoff's accountants look honest. The Government Accountability Office is best-suited to certify calculations made by the Congressional Budget Office. GAO is the government's green eyeshades, and tracks whether money is spent as the law requires. It routinely exposes corruption and waste.

The Senate will soon take up two vital bills that would be natural vehicles for putting this principle into effect. In the next few weeks, lawmakers must vote to keep the government running by increasing the federal debt to an eye-popping $13 trillion. And of course they also will vote on the health bill. What perfect opportunities to add a Bank It First requirement.

Stuart Butler is vice president of domestic policy studies at the Heritage Foundation (Heritage.org).