Health Care Sticker Shock

Whew, health care will only cost $611 billion! That’s the line in Washington right now. An estimate from the CBO on the draft legislation from the Senate health committee is $1 trillion less than its estimate of a previous draft version. Of course the massive cut has the effect of making $611 billion seem like a small number, as the massive numbers coming out of Washington increasing dull away the enormity of the spending numbers. What’s another billion or so? is now common thought. And a million dollars… well, that’s just candy money.

Yesterday, I tried to argue that from an economic theory perspective, the health care costs don’t make much sense. The analysis is largely apart from the debate of the effectiveness of a government plan, though it is worth noting that the CBO also suggests that $611 billion would only cover 39 percent of the uninsured. And that likely means more spending in the future, so don’t get too comfortable with the $611 billion.

But again, even if Congress could design a public health bill that would provide quality services efficiently, without wasting money like Medicare and Medicaid, and actually provide coverage for those 21 million people or so, while keeping the cost at $611 billion, there are still two problems.

The first is that we don’t have $611 billion to spend. The national debt is over $11 trillion and climbing fast, especially considering the massive deficits projected for the next ten years. So even if there is $611 billion in the budget right now, or even if $611 billion can be found by saving money elsewhere, that is still $611 billion not used to pay down that debt. Not used to cut interest payments. At the end of the day, every dollar we spend creating a program that competes with private medical providers and insurers, is exponentially increased over the life of our national debt. What if I said, because of interest on the loans needed to cover the extra debt the health bill added, the cost was hypothetically actually $7 trillion over 20 years. Would that be too much?

And the second problem is one I pointed out on the blog yesterday. If the government creates a successful program for 21 million people, others will want to be a part of it as well. And why shouldn’t they? It’s their tax dollars paying for the program too. But such things are not scalable, as the president himself has admitted. So eventually the program would collapse.