Is Health Reform a Budget Buster?

In a Kaiser Health News piece today James Capretta worries about the future growth of the new entitlement.

If an employer offers “qualified” insurance coverage to a worker, the employee really has no choice but to take it if he wants to avoid paying the penalty for going uninsured. But these rules would create large disparities in the federal subsidies made available to workers inside and outside the exchanges.

Gene Steuerle of the Urban Institute has calculated that, under the Senate bill, a family of four with an income of $60,000 with employer-sponsored health care would get $4,500 less in federal support outside of the exchange than a similar family inside the exchange would get in 2016. …Today, there are about 127 million Americans under the age of 65 with incomes between 100 and 400 percent of the federal poverty line, but CBO expects only about 18 million people will be getting exchange subsidies in 2016.

If enacted as currently written, it’s entirely predictable what would happen next. Pressure would build to treat all Americans fairly, regardless of where they get their insurance. One way or another, the subsidies provided to those in the exchanges would be made more widely available, driving the costs of reform well above the $900 billion limit the administration has set for the initiative.

That sounds plausible enough. But that $900 billion limit is an arbitrary amount that the CBO expects will be paid for (offset) by cuts elsewhere. Capretta himself acknowledges this in his piece, though he also references the debate over whether the offsetting cuts will work out as planned. It strikes me as a bit silly to reject CBO’s budget estimates for health reform unless one is willing to reject CBO’s estimates of everything, in which case how does one make budgetary decisions with respect to pending legislation?

Nevertheless, I agree with the notion that if Americans perceive a disparity between what those with access to the exchanges receive compared to those barred from them there will be a fight to grant greater access to them. To the extent that it costs taxpayers more in subsidies for exchange coverage than it does in preferential tax treatment for employer-based coverage that will increase costs.

But that’s an argument for greater efforts to reduce health care costs via whatever means necessary and reasonable, including changes in the way providers are paid and perhaps a public option. I have no doubt that health care costs are going to be a major budgetary issue, and this would hold with or without health reform. The answer is not to reject reform. The answer is more of it, and focused on costs, not just coverage. To the extent health reform is tarred as a budget buster now or in the future, the truth is it is the way we provide and pay for care, not the reforms, that are far too costly.

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