Advancing a Free Society

CBO Director Elmendorf destroys a core Presidential argument

Friday, May 28, 2010

CBO Director Dr. Douglas Elmendorf has posted the slides he used in a presentation Wednesday to the Institute of Medicine, titled “Health Costs and the Federal Budget.”  The presentation obliterates the claims of the President and his allies about the effects of the new laws on federal health spending and the budget.

For months the President and his Budget Director correctly argued that the goal of health care reform was to “bend the cost curve down.”  The projected path of per capita health spending is unsustainable and will result in three bad outcomes:

  1. those with health insurance will have less money available for other needs;
  2. it will be harder for the uninsured to buy insurance; and
  3. government spending on Medicare and Medicaid will break federal and state budgets.

Here is the President at the Blair House:

The third thing it seems -- I assume we can all agree on is that over the last decade costs have doubled for health care in America -- costs have doubled for government-provided health care, but everybody's health care.  And that that meant that right now everybody knows that that wrecks budgets, it wrecks state budget, it wrecks family budgets, it wrecks federal budgets.  Every 35 cents of every dollar spent on health care is spent by the federal government or the state governments for Medicare and Medicaid -- 35 cents on the dollar.  That doesn't count veterans and other things, just those two.  And so -- and what's happened is -- on the dollar, on every health care dollar.

And so we're facing, all of us around this table, Democrat and Republicans, are facing the fact that there's $919 billion now we're spending on Medicare and the federal portion of Medicaid, and that if things -- I don't see any firewall is going to keep costs from doubling again, we're going to be talking about in the year 2019 we're going to be spending $1.7 trillion if we don't do something to bend that curve.

A common refrain from the President and his Budget Director was “health care reform is entitlement reform.”  And through two budget cycles, when senior Administration officials were pressed on their plans for deficit reduction, they always returned to the argument that health care reform would substantially improve the federal budget outlook.

CBO Director Dr. Douglas Elmendorf has shown this argument to be incorrect.

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