Thursday, July 16, 2009

The Democratic health-reform bills making their way through Congress this week would worsen the nation’s long-term fiscal problems, the director of the nonpartisan Congressional Budget Office told the Senate Budget Committee Thursday.

Senate Budget Committee Chairman Kent Conrad asked CBO Director Douglas Elmendorf if he saw “a successful effort being mounted to bend the long-term [health-care] cost curve,” based on the health reform bills that have been introduced by Democrats in the House and Senate.

“No, Mr. Chairman,” the CBO director responded. In fact, he said, “the [cost] curve is being raised” by the health bills.


Mr. Conrad called the hearing to review the findings in “The Long-Term Budget Outlook,” a report issued by CBO last month.

If current laws do not change, the report projected, federal spending on Medicare and Medicaid combined would increase from about 5 percent of gross domestic product today to nearly 10 percent in 2035 and to more than 17 percent by 2080.

Without changes in policy, Mr. Elmendorf told the committee, that projection means that in 2080 the federal government would be spending almost as much, as a share of the economy, on just its two major health care programs as it has spent on all of its programs and services in recent years.

“Slowing the growth rate of outlays for Medicare and Medicaid is the central long-term challenge for federal fiscal policy,” the report concluded.

By 2013, however, the House health-reform bill would require the federal government to pay 100 percent of the cost to provide Medicaid coverage to all nonelderly people with incomes below 133 percent of the federal poverty level who were not currently eligible. This would raise federal outlays for Medicaid by $438 billion, CBO estimated. Federal spending on Medicaid has already increased from $12 billion in fiscal 1979 to an estimated $262 billion in fiscal 2009.

Subsidies to provide insurance for the uninsured would cost the federal government $33 billion in 2013 and $160 billion in 2019, CBO estimated earlier this week.

Mr. Elmendorf told the budget committee that cost-cutting reforms in Medicare and Medicaid were not nearly enough to offset rising federal costs mandated by the new bills, especially over the long term.

In May, Medicare trustees reported that the net present value of Medicare’s unfunded obligations through 2083 totaled $38 trillion. That’s the amount of money that would have to be deposited today in an interest-bearing account in order to finance these unfunded commitments over the next 75 years.

“The Long-Term Budget Outlook” projected ever-rising federal budget deficits that would cause federal debt and interest payments to soar. “Over time, the accumulation of debt would seriously harm the economy,” the report warned and Mr. Elmendorf reiterated Thursday in his testimony.

Since the previous “Long-Term Budget Outlook” report was issued in December 2007, the fiscal outlook has become “considerably worse,” said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget. “The 75-year fiscal gap increased from 6.9 percent of GDP to 8.1 percent of GDP since the December 2007 [report],” she noted.

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