Health Care Reform Is Not Enough

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A common and reasonable sounding criticism of the recent deficit proposals from folks like Kevin Drum and Brad DeLong is that they don't focus enough on reforming the government's health care programs. It is true that our long term debt problem is almost 100 percent a health care problem. But that doesn't mean that reducing the deficit can be a 100 percent health care solution.

In the next year, deficit reduction will be a bad idea. In the next few years, aggressive deficit reduction will be a bad idea. But in the next decade, aggressive deficit reduction will be a good idea, and the savings from the Affordable Care Act are too small and too uncertain to suffice.

If you look at spending projections from the Center for Medicare and Medicaid Services, there's no way we can bring down that spending fast enough to meet our targets, said Henry Aaron, a health care expert from the Brookings Institution. In fact, in 2019, national health care spending will actually be slightly higher than without health care reform because new government subsidies will be in place while some of the cost-savers will only be getting started.

That leaves us two choices. First, we can enact even more cuts to Medicare and Medicaid in the latter half of this decade, so that the poor and elderly will receive significantly less treatment. Second, we can go after the deficit through savings mostly outside Medicare and Medicaid to spare out commitment for standard health care for the elderly disabled and poor until the Affordable Care Act and future reforms work slowly to reform the entire system.

Where we find those savings is a matter of rife debate. Go to the Heritage Institute, and you'll find a plan from Brian Riedl to cut spending by $300 billion in a few years, mostly from domestic discretionary spending. Listen to the Esquire commission, and you'll be convinced that we can make most of the savings by dramatically shrinking the Pentagon's budget. Listen to the Center for American Progress, and you'll hear good reasons to raise effective tax rates on the rich and maybe add some national taxes (on spending and carbon, for example) to increase revenue.

"In the long haul, we should work feverishly to make health care reform work and bend the curve," Aaron told me. "But in the short term, it wont bend far enough fast enough to deal with the deficit problem."



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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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