Deficit Neutral Health Care Reform

I suspect that many of the people who oppose President Obama’s health care reform plan do so because the CBO has projected that the plan will cost $1 trillion over ten years. They see reform as bankrupting this nation. What they fail to realize is that there will be no bankrupting deficits from health care reform because reform is designed to be deficit neutral. That means that savings in other areas will pay for the cost of health care reform.

President Obama has pointed-out that failure to pass health care reform will be far more costly to America than any reform bill. Speaking before the American Medical Association's annual meeting, President Obama said: "(Failing) to reform our healthcare system in a way that genuinely reduces cost growth will cost us trillions of dollars more in lost economic growth and lower wages."

A study by the Urban Institute, a Washington D.C. think-tank that conducts policy research, has shown that if we fail to enact health care reform it will cause catastrophic financial devastation in America over the next decade and cost the government far more than anything caused by health care reform. There will be an increasing strain on business owners and their employees due to the rising cost of health care and health insurance. Businesses by the thousands will drop health insurance for their employees and tens of millions more people will become uninsured. There will be dramatic growth in Medicaid/CHIP enrollment and spending, and increased spending on uncompensated health care. There will be a tremendous increase in bankruptcies due to health care costs.

President Obama stressed that health care reform would be deficit-neutral over the next decade, explaining how the price tag would be covered. In his budget for fiscal year 2010 the President has already obtained $635 billion for the Health Reserve Fund to pay for health care reform over the next ten years. Most of that amount will come from revenue-raising efforts such as limiting tax deductions for the wealthiest Americans.

The President also explained other means by which the price tag for health care reform would be covered. Estimated savings over 10 years include: Removing subsidies and introducing competitive bidding into the Medical Advantage program, $177 billion; Using Medicare reimbursements to help reduce preventable re-admissions, $25 billion; Introducing generic drugs into the marketplace, $30 billion; more efficient purchasing of prescription drugs, $75 billion; "rooting out waste, abuse and fraud" throughout the healthcare system, $1 billion; adjusting Medicare payments to reflect advances and productivity gains in the economy, $109 billion.

The House health care reform bill provides that any public option will have to be self-sustaining through participants’ payment of premiums. This will be possible even if the premiums are substantially lower than those for private health insurance because a public option will not incur the gigantic administrative costs incurred by private insurance.

One huge benefit of cost savings built into the health care reform bill will be reduction and eventual elimination of the “doughnut hole” in the Medicare Part D drug benefit program. The “doughnut hole” was demanded by the health insurance industry when the Republicans in Congress knuckled-under and enacted Part D. Today, most seniors find that after six or more months their Part D benefits run-out and they have to pay the full cost of their medications. Those costs can be cruelly high, and for some, too high to pay. Now it will be possible for all medications to be covered by the program.

If you are worried about the cost of health care reform, you should be terrified at the prospect of no reform. I can assure you that without reform, you will eventually either lose your health insurance or wind-up paying far far more for less and less coverage.