Health Care Costs Are Core Fiscal Problem
Peter Orszag, the director of the Congressional Budget Office, spoke at the University yesterday. He has been uniquely aggressive, compared with past heads of the CBO, in promoting the notion that the federal budget is on an unsustainable path and that our core fiscal problem is the rising costs of health care, not any of the issues that get more media attention like Social Security or home mortgages or Iraq. Here is a choice excerpt and graph from the CBO’s Long-Term Budget Outlook:
Significant uncertainty surrounds long-term fiscal projections, but under any plausible scenario, the federal budget is on an unsustainable path—that is, federal debt will grow much faster than the economy over the long run. In the absence of significant changes in policy, rising costs for health care and the aging of the U.S. population will cause federal spending to grow rapidly. If federal revenues as a share of gross domestic product (GDP) remain at their current level, that rise in spending will eventually cause future budget deficits to become unsustainable. To prevent deficits from growing to levels that could impose substantial costs on the economy, revenues must rise as a share of GDP, or projected spending must fall—or some combination of the two outcomes must be achieved . . . The Congressional Budget Office (CBO) projects that under current law, federal spending on Medicare and Medicaid measured as a share of GDP will rise from 4 percent today to 12 percent in 2050 and 19 percent in 2082—which, as a share of the economy, is roughly equivalent to the total amount that the federal government spends today. The bulk of that projected increase in health spending reflects higher costs per beneficiary rather than an increase in the number of beneficiaries associated with an aging population.
The graph below represents the long-term budget forecast under two different scenarios:
Thanks to Professor Richard Kaplan for pointing me to this data, for those who do not know him, he is one of the most brilliant, devoted and knowledgeable professors at the University of Illinois, or anywhere for that matter.
Comment by Hanno on 23 April 2008 at 10:37 am:
See but this assumes the status quo on healthcare. I’m not an economist, I won’t pretend to be, but I imagine that public policy can change this dramatically i.e. anything from universal healthcare to different regulations.
Comment by Brian on 23 April 2008 at 10:48 am:
Hanno,
Isn’t that the point? Isn’t this a call for reform, and in particular a call to focus on health care reform rather than, say, Social Security reform (Iraq’s a little different, obviously, since economic concerns aren’t the only or even primary considerations in terms of what’s a good idea to do in Iraq; and the housing crisis is different too since the concern there isn’t really related to the deficit as much as making sure people are financially secure).
Comment by Augur on 23 April 2008 at 11:27 am:
My top three favorite professors at the U of Illinois are:
Kaplan
Ira Carmen
Bruce Smith
Comment by Billy Joe Mills on 23 April 2008 at 12:13 pm:
Hanno,
Universal Health Care, the magic bean of the Democratic Party, would make long-term deficit projections substantially worse. So the assumption of the status quo is a generous one. Also, check out the alternative scenario number 2 (the second chart) which assumes for a change in policy.
Comment by Brian on 23 April 2008 at 1:26 pm:
Just so everybody knows, that statement by Billy is very much the subject of debate. I neither know enough nor have enough time to argue the point, but I don’t want to let it go as though it’s a statement of plain fact.
Comment by Billy Joe Mills on 23 April 2008 at 2:42 pm:
To say nothing as to whether universal health care is good or bad, I don’t think that it is contestable that it would cost substantially more. I would love to see one or two citations even claiming otherwise as I am certainly open to being persuaded.
Comment by erik on 23 April 2008 at 2:55 pm:
WELL, SINCE WE ARE ONLY TALKING ABOUT THE MONETARY COST OF HEALTH CARE, WHAT ABOUT OUR SOCIALIST ARMY’S UNIVERSAL (FOR-PROFIT) HEALTH CARE? WALTER REED COMES TO MIND…
Comment by erik on 23 April 2008 at 3:10 pm:
sorry- i work in all caps.
because i want to head off any responses interpreting walter reed as a success story for capitalism, i want to clarify that my suggestion was that not everything should be quantified in its profitability.
the fact that cuba has a thriving health system compared to us and in spite of a rather rude dictatorship and 40 years of embargo is PATHETIC.
i’d also like to add that this alarmist tripe ignores other budget factors, like the biggest military budget in the world and a contracted war and cost-plus privitization (as in all costs plus a profit guaranteed, aka “returning money to the taxpayers”) as a religion. so, yeah, watch out for those greedy, sickly poor people.
of course central illinois law students/economic theorists don’t regularly have to ride buses with people’s gangrenous limbs stinking the damn thing up, so i guess i’m just being greedy myself… plus i wouldn’t mind being able to get a checkup in between working 2 (soon to be 3) jobs, one of which is 10-20 hours a week of volunteer work.
Comment by Billy Joe Mills on 23 April 2008 at 4:15 pm:
erik,
I’d rather you not complain about your jobs. We went to the same high school and we went to comparable universities. It’s your fault and no one else’s that you have to work 3 jobs at $8/hour.
You spoiled the gifts and opportunities handed to you by your parents and your grandparents and so on. You were getting high while your competition was reading.
Comment by Brian on 23 April 2008 at 4:28 pm:
I’m admittedly not super-well-versed in this, so if I say something that doesn’t make sense, feel free to point it out. But I do think I misspoke above, or at least said things clumsily. To clarify: Yes, it will cost more for the government if there is a universal health care program. Total spending on health care, however, will go down dramatically because of gains in efficiency.
Um. I’m too stupid to continue with this. We need a liberal economist contributor on this blog!
Comment by erik on 23 April 2008 at 4:46 pm:
Rather than attack any of my argument, you chose to an ad-hominem attack–I’m poor for because of a lack of initiative, slackerdom and drug use. Not totally unexpected from your genius mind, but still. Give me a drug test. Right now.
Actually, I work two jobs right now, not counting ESL tutoring. One is a just-short-of-20$-per-hour engineering gig. It is a family job–a gift if you like–and it helps me make ends meet for 20 hours per week. This is my only regular income. It also enables me to volunteer for The Recyclery (.org) for the other half of my week, which usually consists of bicycle mechanics, grant-writing, teaching, making deliveries and pickups in a truck around the Chicago area and the general administrative work involved in running a 501(c)3 non-profit. Generally this is a 6-day week.
The issue isn’t whether or not I could be wealthy, either; I could be heir to a part of the family business and working a 50-hour week with more money than I know how to spend and full benefits and general misery, but I prefer my current setup. I’m going back to school to get my high school teaching certification (for CPS, not EGHS) this fall.
Now, how about my argument? Surely you have some kind of chart ready by now.
Comment by erik on 23 April 2008 at 5:23 pm:
Sorry, but I was trying to fit some Recyclery computer work in last minute after my wage workday and I kind of rattled that last post off.
I am able to live more or less comfortably below the poverty line right now because of choices I make. It isn’t always the easiest thing to do. I don’t drive my 175-lb body around in a giant metal cage, I don’t stuff my face with whatever beefy creation id fancies and I don’t buy new clothes. I don’t get cable. Some of these things are sacrifices (depending on how you look at them). Some of this is definitely political and some is because I choose to do work that I love. I also know that my work is benefitting society even if it can’t be measured by a paycheck (and it has in the past). I’ve thought about applying for Government medical coverage but decided not to–in part because there are plenty of people less fortunate than me who need it more (even if they are a bunch of impish drug addicts waiting to thrill you on your next el ride), and I didn’t want to be competing for the scarce compassion–if I poke myself in the shop or get hit by an SUV, too bad!
The more I type, the more offended I get. Your remarks are so beautifully, horribly honest and telling that I wish I could just copy and paste your own post back a few times. Un fortunately I can’t.
I’ve heard that in Japan you can really ruin a sunrise by verbally pointing out its beauty. If only you could cover up the stink of a pile of shit as easily.
Comment by Billy Joe Mills on 23 April 2008 at 5:37 pm:
erik,
It sounds like you are leading a good life. I am sorry for making inferences from your statements. Good luck. I was wrong.
Billy
Comment by Billy Joe Mills on 23 April 2008 at 5:38 pm:
oh, but you and I both know that you’ve done plenty of drugs, perhaps not anymore, but ya have…which is fine, doesn’t bother me that others do it.
Comment by J. Prescott on 23 April 2008 at 5:51 pm:
Enough with the military and Cuba arguments. Those arguments weren’t very good when Moore made them either.
The US military is so large because our responsibilities extend to NATO and for a large part of UN operations. As a result of our large military, other countries have more resources to pursue social programs, like, say, socialized medicine. The US curtails its military, other countries have to pay more for their defense, and as a result their socialize medicine suffers. One could make an argument that the US is the efficient military producer, and by centralizing the production the world benefits because there is more resources to use for other things. So, without a large military, its possible that there is no social medicine in Canada or Europe.
As for Cuba, the country has finite resources and many needs. How are Cuba’s roads? How are their schools? How is their standard of living? In other words, what is the opportunity cost of socialized medicine in Cuba? Does socialized medicine there mean living another 10 years in misery as opposed to 10 less years in a stable nation? Whats the answer, cause I genuinely don’t know. But it would be nice if things were placed in context as opposed to whining “well they have it.”
Moore is a hack, and his arguments weak.
Comment by erik on 23 April 2008 at 5:54 pm:
…and i’ve just barely made it!!!
that must be why the invisible hand comes down on all the other drug ATTICS so much harder.
now quick, bury this with a new topic… how about
OUR HIGH PRISON POPULATION IS JUST ANOTHER SYMBOL OF OUR PROSPERITY
OUR HIGH MILITARY BUDGET IS JUST ANOTHER SYMBOL OF OUR PEACEFUL INTENTIONS
IGNORANCE IS STRENGTH
Comment by erik on 23 April 2008 at 5:55 pm:
i could give a shit about michael moore.
Comment by J. Prescott on 23 April 2008 at 6:08 pm:
You accused Billy Joe of not answering your questions. Does you volunteering a lot exempt you from answering mine?
Socialized medicine has a cost beyond dollars but in opportunity. Again, all you did was repeat tired old arguments, again made popular by Moore, where you “give a shit about him or not.” Tell me what would you cut, and what would you be willing to sacrifice to get this done. A military cut would put a lot of pressure on our allies. Other programs would probably need to be cut and would put tensions on us. What are you willing to sacrifice, or are you only adept at spewing semi-coherent dogma?
I did not in any way shape or form suggest any of what you did propose. But way to try to move me to a less defensible position by misrepresenting what I did say. Feel free to try to use an argument that has not been used ad naseum.
Comment by erik on 23 April 2008 at 6:12 pm:
the last long post i typed was before yours had appeared, prescott. the next one was off hand. i’ll respond again later; right now i’m in the middle of moving.
also i am two poor and stupid too anser your questions and i should probably just get a job.
Comment by erik on 23 April 2008 at 11:24 pm:
Prescott.
You are putting me in a kind of difficult position. How am i supposed to answer your question? It seems to be “what would you cut to provide health care” as though I’m some kind of government budget team now. You also seem to be implying that I have to choose between a huge, offensive military and free healthcare for everyone in the USA. If so, THANK YOU!!!!!
But I’m guessing that a) that wasn’t what you meant and b)you aren’t willing to debate whether or not our brave men and women are being ordered to do anything less benign or more vague than spread/defend “freedom.” So I’ll pretend that you are actually asking me to answer an impossible question.
And I’ll say, well, I can’t answer that because I’m not a government budgeting team. I know the free market answer because it requires no more math than a Gay Curing Camp requires knowledge of modern medicine. My point, if you will please READ, wasn’t to lay out a fiscal plan. The title of Billy’s post is HEALTH CARE COSTS ARE CORE FISCAL PROBLEM. This to me suggests that an economic implosion is hanging on health care costs, which seems…wrong to me? Is that enough to say that? Apparently it was for billy in glibbly paraphrasing Orszag:
“our core fiscal problem is the rising costs of health care, not any of the issues that get more media attention like Social Security or home mortgages or Iraq.”
I must admit that I would be alarmed if I were the forward-thinking type who is concerned about a budget defecit when I am 98 years old (even though it is forbidden, i’d still like to mention that there is also a “100-year war” missing from the graph), but I live in now and perhaps a bit into the future and I sadly find even home mortages scarier than this. For more of Orzgag’s nerdy wisdom I googled him:
http://cboblog.cbo.gov/?p=84
some of it gets downright creepy.
My point was that there is more than one way to run an economy (personally I’m in favor of no one running it–and that includes using state power to reinforce property. Want to talk about property some time?) The Cuban Communist Party or castro or whoever is running the show over there did their thing, we do ours. I’m not saying either is perfect, but we all have different priorities. I’m not saying you have the wrong ones, but people obviously isn’t very high on your list.
You seem to have a tendency to isolate facts. Other countries bogart our military so that they can have free healthcare? They pay higher taxes! And yes, the war DOES COUNT as part of our budget–even if the filthy MSM only wants to report on the boring people deaths. It isn’t something I just made up. You also seem to have the paranoid delusion that without this army we would be absolutely defenseless against some kind of enemy. As billy would say, this is clearly, patently false and you should probably stop smoking so much pot before your head rolls away.
There was a great article in Harper’s in maybe 2006 on Cuba since the fall of the USSR–on how they managed to get by without Soviet oil. Very interesting. Maybe Prescient, given the food shortages going on around the world today. Ah, here it is: http://harpers.org/archive/2005/04/0080501 …my favorite magazine. The point is that even this dictatorship has gotten by in spite of the US’ criminal embargo. If anything today the doctors are a profit, as they are running about all over Latin America and EVIL STRONGMAN CAUDILLO HUGO CHAVEZ is giving them fresh oil. As much as I hate the state, ALBA really pumps me up! And come on, it isn’t like US economic policy is that much more democratic anyways.
just for the record… none of my points have been addressed (oh, sorry. I mentioned cuba and apparently REALLY hurt your feelings). also, sorry if i’m not as funny as i think i am or if i am rude or my argument is bad or convoluted. it is late.
Comment by kofi the arguing about cuba is SO last year on 24 April 2008 at 7:12 am:
socialized healthcare in cuba
Comment by erik on 24 April 2008 at 7:33 am:
ok, ok, ok, ok, ok, ok, ok, ok, ok, ok, ok, ok, ok, ok, ok, ok!
I’m sorry I mentioned Cuba!
Even if I didn’t really make it part of my argument!
I’ve made many criticisms of Cuba to many people. I don’t consider it any kind of ideal socialist state, but I definitely don’t think the US has it right either. (This website looks about as credible as Michael Moore, to boot). The fact remains that Cuba is sending tens of thousands of doctors out around Latin America, that just yesterday it met with other regional leftists to work out a food aide program… I mean, call this a niche for politicking or whatever, but you can’t argue Cuba’s hospitals are all shit.
And then there is the embargo:
http://www.annals.org/cgi/reprint/132/2/151.pdf
(from the annals of internal medicine):
During my current
visit, I was struck by the profound changes that have
occurred in a health care system that was once
considered the preeminent model for developing
countries (1).
This article describes the effects of economic crisis
and the U.S. embargo on the health of Cuba’s 11
million citizens. It includes personal reflections on
the ways in which the health care system has deteriorated
during years of progressive U.S. sanctions.
Clearly, the situation in Cuba is complex and economic
decisions made by the Cuban government
may also have weakened the public health infrastructure.
Embargoes affect health indirectly. However,
a health care system such as Cuba’s, which
allows universal access to care, provides a unique
opportunity to examine health trends that may have
been influenced by U.S. embargoes on sales of
pharmaceutical products and food.
The U.S. embargo against Cuba began in 1961.
Although the embargo has always had a negative
effect on the Cuban economy, its effect on the
health care system had been significantly offset by
subsidized trade and aid from the former Soviet
Union, countries in the socialist bloc, and western
Europe. Public health and universal access to free
medical care have been priorities of Fidel Castro’s
government since its inception in 1959 (1–3). Polio,
malaria, tetanus, diphtheria, and human rabies have
been eradicated from the island (1, 3)…
and it goes on. Mind you that they are on an isolated island 80 miles from some of the luxurious tourist cities in the US.
Comment by erik on 24 April 2008 at 7:39 am:
*most luxurious, that is.
more selections from the article:
“Several public health catastrophes on the island
have been directly attributed to the U.S. embargo
(8 –10). In 1992 and 1993, more than 50 000 cases of
optic and peripheral neuropathy occurred. This epidemic
was attributed to reduced nutrient intake,
which was caused by food shortages, and local tobacco
use, which increased the risk for blindness.
Use of costly multivitamin supplements dramatically
decreased the incidence of blindness (9, 10). In
addition, an epidemic of esophageal stenosis in toddlers
who inadvertently drank liquid lye is believed
to be the result of a soap shortage that caused Cubans
to use lye as a substitute (8). A 1994 outbreak of
the Guillain–Barre´ syndrome in Havana was caused
by water that had been contaminated with Campylobacter
species because chlorination chemicals were
not available for purification (8). Serious shortages
of insulin, other medications, and vaccines have also
taken their toll, especially on the health of children
(2, 3).”
There is an interesting part on HIV but it doesn’t help my argument… if you want to hate Cuba even more you should read it.
“From a more personal perspective, I was impressed
by the increased tourism in Cuba and the
openness with which citizens discussed the failures
of the revolution as well as its successes. Large-scale
prostitution was controlled after Castro came to
power but has recently increased because of the
economic trade crisis and burgeoning tourism. Because
prostitutes threaten HIV containment, Castro
has “cracked down” on jineterismo, or the sex trade
with tourists.”
“In the 20th century, economic sanctions have become
a common tool of foreign policy. Examples
include the collective international sanctions against
southern Rhodesia, Iraq, Serbia, Montenegro,
Libya, Haiti, South Africa, Rwanda, Angola, and
Somalia and unilateral U.S. sanctions against Nicaragua,
Cuba, Iran, Panama, and Sudan. Because
economic sanctions result in shortages of food and
medical supplies, their most severe consequences
are often felt by the persons who are least culpable
and most vulnerable; untoward health sequelae usually
occur in civilian rather than military populations
(8). It has been shown that women and children
younger than 5 years of age are particularly affected
by food shortages and weakened public health infrastructures
caused by embargoes (13).
The U.S. embargo against Cuba, one of the few
that includes both food and medicine, has been
described as a war against public health with high
human costs (10). Although the Cuban government’s
curtailment of individual liberties and privacy
may be seen as an abridgment of personal
freedom, we as health care professionals have a
moral duty to protest an embargo that engenders
human suffering to achieve political objectives.
Medicine, food, and water purification materials
should be made available or, preferably, should be
exempt from sanctions. Official monitoring of the
effects of economic sanctions on civilian populations
should become a high priority.
Addendum: In August 1999, the U.S. Senate
voted 70 to 28 in favor of eliminating unilateral
export bans in an amendment to next year’s agricultural
appropriations bill. This would have effectively
ended the embargo on exporting food to
Cuba. The U.S. House of Representatives subsequently
deleted this amendment in a House–Senate
closed committee session. The U.S. Senate leaders
are planning yet another vote on legislation (Dodd/
Serrano legislation S. 926/H.R. 1644) that would
permit the sale of food and medicine to Cuba. The
date for this vote had not yet been decided when
this article went to press.”
Comment by erik on 24 April 2008 at 7:43 am:
for the record, i really was trying to talk about the claim HEALTH CARE COSTS ARE CORE FISCAL PROBLEM which still seems absurd to me.
also, in full disclosure I think that cuba is probably a really pretty country and i wish i could afford to go there.
http://www.utsa.edu/today/images/artworks/havana/3cars.jpg
Comment by erik on 24 April 2008 at 7:44 am:
more direct and biased:
http://www-personal.umich.edu/~ksinghz/cubamed/FoodMedicine.htm
Comment by Billy Joe Mills on 24 April 2008 at 8:36 am:
erik,
I can’t read all that you wrote, but I did notice that you said, “for the record, i really was trying to talk about the claim HEALTH CARE COSTS ARE CORE FISCAL PROBLEM which still seems absurd to me.”
My claim was basically a copy of the Director of the CBO. If you look at the graph I posted or any of the objective budget data, you will see that health care costs overwhelm any other costs.
Comment by kofi the you went wrong when you decided to socialize an industry on 24 April 2008 at 8:37 am:
you can’t argue Cuba’s hospitals are all shit.
Is this a concession that some of Cuba’s hospitals are hell holes? I’d be willing to acknowledge that there may be some number of hospitals, or some parts of some number of hospitals, that are up to modern standards of care. But then this is the problem with socialized healthcare. It will not guarantee the same care and the same amenities for all people in all places. Much like our socialized education system, there will be some areas with phenomenal hospitals and others with hell hole hospitals. And liberals like Brian and Hanno will bitch and moan and say its not fair, and be kept up at night by their confusion and bewilderment. “We got our socialzied healthcare… where did we go wrong?”
Comment by Hanno on 24 April 2008 at 8:40 am:
Kofi -
How dare you lump me in with Brian!
Anyway, the way I sees it is better to have a crappy baseline with a gold standard to bitch and moan about and aspire to than to have a platinum standard with a non-existent baseline.
Comment by Brian on 24 April 2008 at 9:07 am:
Hey!