Even Paid-For Health Care Plan Would Entrench Budget Woes

IBD Editorials ^ | June 29, 2009 | JED GRAHAM

[Kaslin]

As analysts project $10 trillion in deficits this decade, President Obama's main path to fiscal fitness is to curb federal health care outlays long term.

Obama's public insistence on budget-neutral reform has put Washington's focus on the difficult job of paying for an expansion of health care coverage. Budget watchdog groups generally approve of this pledge to fully pay for a new health care entitlement, though it's not at all clear that Congress will deliver such a plan.

But using health care cost cuts to finance a big spending expansion — rather than reduce the deficit — may entrench near-term budget problems.

In 2019, with Medicare and Medicaid consuming an extra 2.3% of GDP above 2008 levels, the Congressional Budget Office projects a budget deficit of 5.5% of GDP under the White House plan.

Slowing the growth of these health care entitlements could hold down the deficit, but the administration wants to use projected Medicare savings to pay for near-universal health care.

"In light of the unsustainable path of the federal budget under current law, using savings to finance new programs instead of reducing the deficit would necessitate even stronger policy actions in other areas of the budget," CBO director Douglas Elmendorf wrote this month.

CBO's new Long-Term Budget Outlook says that waiting to address the long-term deficit until 2020 could hike the eventual cost by as much as 20%, or 1.6% of GDP.

[Kaslin]

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