ObamaCare v. Prescription Drugs, Part II

More

Andrew responds:

The Medicare prescription drug entitlement almost immediately was projected to cost $1.2 trillion over ten years - more than Obama's cost-projections. The CBO's estimate of long-term spending in the program is $8.2 trillion. Unlike Obama's healthcare plan, which focuses on the younger uninsured working and middle class, Bush's massive bribe was directed at seniors, a demographic set to grow very fast in the near future.

Now Megan is right that we do not know the final cost of the current proposal or what the future will bring. But when the CBO scores the final version, let's contrast and compare, shall we? And one more thing: the more immediately expensive one was rammed through by Republicans, the allegedly small government party. I still, for some reason, expect a little more fiscal responsibility from the right than the left. But we now know, of course, the both are dreadful but the GOP is worse.

These are not quite the right comparisons to make.


For starters, those figures aren't really the right ones.  As the web page from which Andrew picked that Washington Post figure notes, the CBO's estimate of the ten year cost was considerably lower at the time.  Also, the $8.1 trillion is a GAO report, not a CBO report, and it's from 2004. The Medicare prescription drug benefit has (so far, knock wood) turned out to be cheaper than we then thought because of heavier use of generics, and the Medicare Trustees now place the unfunded general revenue liability at 7.2 trillion over the 75 year horizon. 

But that is still a large number, and it is true that the projected costs increased rapidly.  When the prescription drug benefit was passed, it was scheduled to cost $534 billion over ten years.  That number immediately started going up.  Why?  Because the CBO scores from the ten year period starting when the law is passed.  But the program didn't actually go into effect until 2006.  That's why the price tag had gone up so much when the Washington Post wrote that article in 2005. Also, the Bush OMB was fond of issuing hysterical projections so that it could wow us with a "surprisingly" low deficit number every mid-term review.

All the Democratic bills on the table this year use the same delay dodge, with an extra year added in order to give them lots of time to get past the 2012 elections before their constituents find out that the government isn't giving them health care out of taxes on "the rich", but making them buy it out of their own money.  If we actually break down the cost by year of operation of this $900 billion program--taking the heroic assumption that Obama's number is actually correct, rather than the more traditional White House lowball--that makes it $150 billion a year, not less than $100 billion a year.  Of course, as health care costs are growing at quite an impressive clip, by the time we get close to actually starting this program, its 10 year cost will be much closer to $2 trillion than to $1 trillion.

Meanwhile, the cumulative undiscounted 10 year cost that the Medicare trustees are now projecting for the next ten years is $945 billion, thanks to that happy surprise on generics in the formularies.  I am not counting premiums, which pay for slightly more than 10% of the program.  Nor am I including estimates that Medicare Part D saves other parts of Medicare money by cutting down on surgeries, hospitalizations, and other costly care. I want to compare apples to apples, spending to spending.

We do not yet have any good way to look at the Obama numbers, because there is no plan specific enough to score.  But I have yet to hear anyone make a credible argument that what Obama is promising can be done at the quoted price tag.

As for whether the Republicans are "worse" on budget deficits than the Republicans . . . well, I think that was a much easier argument for both of us to make nine months ago.  Now Obama's projected deficit in 2019 is are higher than the worst of the Bush deficits--4% of GDP, almost a trillion dollars. The CBO is slightly kinder--they project 3.4% of GDP as a budget deficit, and $722 billion, but of course that's without any changes to the Bush tax cuts, any annual AMT "fix", any delay of the draconian cuts that are supposed to happen to Medicare doctor reimbursement rates, and no ObamaCare. 

You cannot blame those deficits on Bush's tax cuts, or his war spending, because the objectionable bits are slated to end next year. (I assume that Andrew still supports the invasion of Afghanistan).  You can certainly blame Bush for is a $100 billion increase in the on budget net interest on the debt (though that figure is should really be adjusted for inflation).  You can also blame him for about $100 billion worth of Medicare Part D But that still leaves you more than $500-700 billion worth of deficit that Obama has to own--larger than any Bush deficit.   He has made no indication that he has any plans to pay for this.  Instead, like Bush before him, he is adding a huge, expensive new entitlement on top of grotesque budget gaps.

But the fiscal picture he is starting from is considerably grimmer, and the entitlement he is adding is considerably larger.  Assuming that we actually cover most of the uninsured who are not illegal immigrants, this is a program with nearly as many beneficiaries as all of Medicare.  Some of them will be paying their own way.  But according to the Robert Woods Johnson Foundation, almost 18 million of the uninsured will end up on Medicaid under any plan that extends it to 133% of the poverty line, which is virtually all of them.  Altogether, between 2/3 and 3/4 of the uninsured will be receiving some sort of subsidy under any of the proposed plans, depending on whether they offer assistance up to 300% or 400% of the poverty line. 

Maybe Obama will "bend the curve".  Maybe he will raise taxes on the middle class, and really spike them up on the wealthy.  Maybe aliens from the Horsehead Nebula will invade, and we'll have bigger things to worry about than the US budget.  But based on the actual information we have now, Obama will leave the United States in much worse fiscal shape than his predecessor. 

This is not because George Bush made him do it, or screwed up the economy for him.  It's mostly because Medicare is about to turn into the sucking chest wound of the Federal budget, and Obama is the chap lucky enough to be there as the hemorrhaging really gets going.  It's not really his fault (other than in the sense that he chose to run for office in an unpropitious sort of year).  But it doesn't matter whose fault it is, because the answer is "every single president since Coolidge".  He's the guy who has to figure out to close the budget gap that was bequeathed to him by Lyndon Johnson and FDR, and which his predecessors--Democrat and Republican--have been punting on for decades.  Rather than embrace that responsibility, or even eye it warily, he's decided to ignore it in favor of his personal policy priorities.  That's entirely understandable, and hardly unique.  But it hardly puts him on a higher plane than George Bush.

Frankly, I find all of this stuff sort of pointless.  I don't judge political parties based on how far their performance deviates from my expectations--and frankly, given how quickly Obama has abandoned his previously rather surprisingly honest approach to policy numbers, his more ardent supporters should be glad I don't.  I judge them on what they do.  Bush was a bad president, Medicare Part D was bad policy, and he left the budget in worse shape than he found it.  But that doesn't mean Obama gets a pass because, after all, what else do you expect from Democrats?

Jump to comments
Presented by

Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

Get Today's Top Stories in Your Inbox (preview)

Sad Desk Lunch: Is This How You Want to Die?

How to avoid working through lunch, and diseases related to social isolation.


Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

Where Time Comes From

The clocks that coordinate your cellphone, GPS, and more

Video

Computer Vision Syndrome and You

Save your eyes. Take breaks.

Video

What Happens in 60 Seconds

Quantifying human activity around the world

Writers

Up
Down

More in Business

Just In