Nobody, but Nobody could fool my Grandmother

On a quiet Friday afternoon this summer, the central justification for Obama’s health-care overhaul died a quiet death.

A Rasmussen poll last week showed that a mere 7% of Americans want to keep it as it is.

And so, for those from Lake Havasu, more than 9 out of 10 want it changed or scrapped. And here’s part of the reason why.

On that day, a bipartisan coalition in Congress reversed the scheduled Medicare cuts to physician payments, ensuring that, over the next decade, the White House’s reforms will cost many billions more than advertised. After over a year of debate and lofty rhetoric, the reality is this: Obama’s goal of “bending” the health-care cost curve has unraveled in just a few months.

Obama and his supporters argued that we need ObamaCare in order to tame the federal budget deficit. When he signed the bill into law, he touted the importance of the legislation in reducing long-term deficits. Democrats cited Congressional Budget Office scoring showing that the health legislation would reduce the deficit over ten years to the tune of roughly $130 billion.

But that was back in March. In May, the CBO released its quantitative analysis showing that discretionary spending not accounted for in the previous scores would cost $115 billion. The CBO director himself expressed significant doubts about potential deficit reduction. Speaking to the Institute of Medicine, he said: “Rising health costs will put tremendous pressure on the federal budget during the next few decades and beyond. In CBO’s judgment, the health legislation enacted earlier this year does not substantially diminish that pressure.”

And that brings us to the quiet Friday afternoon of June 25. By canceling scheduled Medicare cuts, Obama and his Congressional allies have made the fiscal problem even worse: Not only do those fiscal problems remain, but White House reforms meant to address them will push net federal-government health expenditures further into the red. Any notion of fiscal balance has been lost.

Yet canceling these scheduled Medicare cuts is nothing new. Time and again, Republican and Democratic leaderships in Congress have haphazardly voted to undo scheduled cuts.

Congress reversed planned Medicare physician cuts in 1999—and 2004, 2005, 2006, and 2008. In fact, since 1997, when members of both parties agreed to automatic cuts if spending rose faster than population and economic growth, the program has been cut just once, in 2002.

Maybe it’s the pressure of the doctors’ lobby. Maybe it’s the seniors’ lobby. Maybe it’s both.

And this Democratic Congress has been no better. In fact, just months after passing Obama’s health-reform legislation, Democrats vigorously and successfully pushed to postpone the Medicare cut until November (they had previously voted to delay it from April to June 2010).

More worrisome is this: in liberal circles, it’s popular to argue that Congressional efforts to control Medicare costs under the Sustainable Growth Rate (SGR) formula have been overly successful. James R. Horney and Paul N. Van de Water make exactly this point in a publication for the liberal Center on Budget and Policy Priorities. They write: “Even though Congress did not allow the full cuts required under the SGR formula to take effect, it has still cut the physician reimbursement rate substantially – at its current level, the reimbursement rate in 2010 will be 17 percent below the rate for 2001, adjusted for inflation.”

Picking up on this point, Paul Krugman recently argued that Medicare has been historically very successful at reining in costs. But praising Medicare cost containment in a time of heavy health-care cost inflation is like praising Lehman Brothers for making good investments in Latin America when the market for sub-prime mortgages was imploding.

Let’s put this in perspective: health inflation was 3.4 percent last year, just over double the basic inflation rate. Tellingly, the worst cost increases were experienced by Medicare (costs were up 8.6 percent), and Medicaid (9.9 percent).

Unfortunately, the White House and Congress squandered a great opportunity to bend the cost curve downwards, opting instead for the status quo. The quiet congressional vote in June shows how far the administration has strayed from its reform rhetoric. If we are ever to rein in health care spending, we need leaders who will make tough choices and tough cuts. Their rhetoric must become reality.

But don’t expect it during the life of this Congress nor the remaining 30 months of this administration.

As my grandmother used to say, “From my lips to G-d’s ears”.