Budget Gimmicks Hide the True Costs of Obamacare – | Citizens Against Government Waste

Budget Gimmicks Hide the True Costs of Obamacare –

The WasteWatcher

There is a lot of discussion of how much the Obama healthcare plan will cost the federal government.  The House bill, if passed, will spend more than $1 trillion over 10 years and the Senate bill would spend more than $800 billion over 10 years.  This spending will be paid for with a lot of higher taxes. 

Interestingly, healthcare coverage only expands in 2013, yet the tax hikes to pay for it begin in 2010.  When Obamacare supporters claim the legislation won’t add to the deficit, skepticism is warranted.  To make the bill deficit neutral over the 10-year time period will require 10 years of taxes to pay for seven years of coverage.  Beyond the first 10 years, the government will either be forced to raise taxes even higher or ration healthcare even more.

And that is only at the federal level.

Obamacare will add an estimated 11 million people to the Medicaid rolls and the legislation only accounts for offsetting the federal share of Medicaid.  Under Medicaid, states must provide matching dollars under a federal formula known as the Federal Medical Assistance Percentage.  The federal share varies from state to state, but averages 57 percent of the total cost of Medicaid.  That means that states must pick up, on average, 43 percent of the cost.

The Congressional Budget Office (CBO) has estimated that adding 11 million new people to Medicaid will cost federal taxpayers $287 billion over 10 years.  That means states will be handed a $216 billion unfunded mandate over that same period.  States will either be forced to eliminate other services to pay for this mandated spending, or raise taxes.

Governors were bipartisan in their opposition to requiring the states spend more money on healthcare without providing more dollars.  Colorado Governor Bill Ritter Jr. (D) wondered, “There’s a concern about whether they have fully figured out a revenue stream that would cover the costs, and that if they don’t have all the dollars accounted for, it will fall on the states.”

Mississippi Governor Haley Barbour (R), head of the Republican Governors Association said, “This huge expansion of Medicaid would be extremely expensive in my state. We anticipate that it would increase spending on Medicaid by 50 percent, and that’s money we don’t have. And other states don’t have it either.”

“As a governor, my concern is that if we try to cost-shift to the states, we’re not going to be in a position to pick up the tab,” said Washington Governor Christine Gregoire (D).

It is easier to make legislation “deficit neutral” when mandating that states spend more money, while providing no way to pay for it.  This is hidden spending that will lead to future state and local tax increases.

But that isn’t the only budget gimmick employed in the Obamacare legislation to hide the true size and nature of spending and taxes that will be needed to support the healthcare plan in the future.

One old budget chestnut that Congress has used for years is the phantom savings from physician reimbursement rates in Medicare.  No one would say that doctors are overpaid for treating Medicare patients.  Yet, in order to make the budget balance on paper, Congress always claims savings in the future by cutting the reimbursement rate for doctors.  Then, each year, Congress restores that funding and promises to make up for that shortfall by enacting steeper cuts in future years.

For physicians, this gimmick is no joke.  Currently, the federal budget assumes that the doctors will have their reimbursements cut by more than 20 percent in 2010.  Rather than fix this nonsense once and for all, the Obamacare legislation in the Senate postpones the cut for one more year and pays for it by promising to cut doctors’ reimbursements by 25 percent in 2011.

If past is prologue, and in Washington, it is, those cuts to reimbursement rates will never happen; they will be restored “temporarily” each year.  That means Congress will eventually have to come up with another $300 billion over the next 10 years if it wants to claim Obamacare is truly deficit neutral. 

That will mean even more tax increases or even more rationing of health care.

Roger Morse, Visiting Fellow


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