How Health Care Projections Can Go Wrong

Yesterday I wrote:

Fiscally, [health care reform] is about keeping health care inflation from running away with an ever-increasing percent of government spending.

A couple commenters took me to task. How could I say that health care reform would curb health care inflation when most of the current plans' are projected to add to our long-term debt?



I have two responses. First I didn't mean to imply that the final health care bill would bring down costs. I don't know how I could say that, considering we don't know what's going to be in the bill. I said health care reform "is about" fiscal control, because that's a stated goal of health care reform. The president said he won't sign a bill that isn't deficit neutral, which means it must be projected to pay for every dollar it spends. Of course, that's a key word, projected. And I think I've been pretty careful to point out all the ways cost control could be a political nightmare.

But sometimes projections get it wrong the other way -- they wildly overestimate the cost of complicated programs. Here's Howard Gleckman of the Tax Policy Center on the crazy inaccurate projections of Medicare D, the prescription drug bill passed under President Bush:

The March, 2004 Medicare trustees report predicted 2008 premiums would range from $12.7 billion to $19.7 billion. Actual 2008 premiums: $5 billion. The trustees figured 2008 spending would range from $77 billion to $131.4 billion, with a mid-range of $101.9 billion. In reality, the program paid just $49 billion in benefits last year--half the intermediate projection and far below even the low-cost estimate. For context, the $53 billion difference between projected and actual spending is equal to half of the total estimated annual cost of all of health reform.

The door swings both ways.