The projection of spending under the current system. Congressional Budget Office
The number one concern of Americans regarding health care reform is the costs. Americans would love to have everyone covered but first and foremost Americans want to know what reform will do to keep America from going bankrupt. This is understandable since premiums have doubled in the last decade. In 2008 alone health care premiums rose at twice the rate of inflation as the average person now spends $7900 on their health care. Americans are feeling the pinch and want to know that reform will make things better.
The Democratic health care reform proposal took a major hit when the Congressional Budget Office said current reform plans do not do enough to constrain costs. Republicans hailed the CBO report as gospel and called on Democrats to immediately scrap their bill. In reality, the CBO estimates did not take into account many savings the Obama administration claims would go into effect under their plan. So what is fact and what is fiction when it comes to health care costs under the reform proposal?
The answer to the question really depends on whose costs are being analyzed. If we are referring to government costs the only answer at this point is costs will go up. Under the plan government will effectively subsidize the payment of insurance premiums for the poor. This is a large part of the some $1 trillion dollars in costs that must be paid for in the bill. However, looking at the larger picture of costs for society as a whole an argument could be made costs will go down. The Obama administration points to agreements with private insurance companies to reduce costs by 1.5% which would bring about $2.1 trillion in savings. This does not even include an agreement with private hospitals to reduce costs by another $135 billion dollars. These voluntary agreements made with industry groups are a large reason as to why many lobbyists are actually supporting the passage of reform.
Another relevant consideration is comparing the costs of reform to the costs under the current system. As the above graph demonstrates the costs under the current systems of Medicare and Medicaid will skyrocket to over 19% of the entire countries Gross Domestic Product. This would effectively mean the federal government would have to spend its entire budget just on Medicare and Medicaid. The reason is simple, as health care services grows more expensive and the population grows older more and more money will have to be spent caring for the elderly.
As for overall spending, right now health care costs take up around 16% of the entire country's income which will rise to 25% by 2025 and 37% by 2050. So if things do not change the average American will spend 1/3 of their gross income just on health care by 2050. In addition, if we keep the current system federal government will have to either abandon every other program or significantly increase the already large federal debt to pay for health care. This is why the Obama administration is, correctly, making the case that the cost of inaction is actually higher than Obama's reform.
Conclusion:
The truth is you can find very smart economists to take both sides as to whether the Obama health care reform will increase costs. At the same time, I have not been able to find one economists who says the current system is sustainable. Without reform costs for Medicare and Medicaid will take up our entire budget and the average American household budget will be squeezed by increasing premiums. At the very least the Obama proposal, when also considering agreements made with industry, would help to reduce the overall costs devoted to health care. Republicans may still claim their proposals would do more to constrain which may or may not be true depending on what is included in the Republican plan. While Republicans have released some broad proposals they have yet to all agree on a comprehensive and detailed plan to the same degree as Democrats.
Comments
Yes Ryan, Obamas givernment should own banks, car companies, insurance companies, health care and energy sectors.
because to do nothing is worse right? Interesting how liberals always have an strawman arguement to cover their incorrect choices.
Liberals better get that global warming tax bill passed becase the earth is starting to cool on its own (as its done for centuries) and if that happens then LIE-berals like gore cant take credit for it!
Pretty typical blind right wing support...hey captain we aren't rooting for football teams here. Picking a side and blindly supporting it isn't a very responsible thing to do. Try doing a little reading about current affairs from unbiased sources and wake up...Defend your rights and quality of life...quit regurgitating old gop rhetoric...that thinking is outdated.
regardless, either a new tax will be put in place to pay for the health car or added on to the existing ones that we already have. hmm, fica comes to mind, but what people are not see is that once a percentage is in place for health care taxing, that percentage can and will be increased greatly with a simply accuse of we didn't plan for this or the over head was greater than expected. we heard that one before with clinton.
Any economist that claims costs will not rise should be flipping burgers.
More people getting treatment = more cost.
To the poster "i paid attn in school": Congratulations on your scholastic achievements; however, your post makes it painfully obvious that you didn't pay much attention to the article. The figures in the multiple billions of dollars look impressive and all, but you have to remember that the 2.1 billion dollars of cost cutting imposed in the private insurers only amounts to slashing premiums by 1.5%. Since you paid attention in school, you're arithmetically astute enough to realize that's a savings of $10.50 on a $700 per month health premium. Wow, what a lot of money! Time to take that trip to the Bahamas! By the way, while you're there, be happy knowing it was made possible by fines paid by Americans who are above the poverty line but still not well-enough off to buy their wn health insurance. And you think this is a good idea just because it's your lovely Democrats who cooked up the idea, even though nearly 20% of the House Democrats voted against it? Take your own advice.
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