Government health care cost overruns
by Brian T. Schwartz | 7:07 am, November 21, 2009 | Comments Off
Harry Reid’s Senate health bill up for a procedural vote on Saturday, which could allow it to move forward to debate. (Yet Republicans are pushing to read the whole thing, which could take 34 hours!) In any case, be wary of how this bill will cut the deficit: remember how unreliable predictions of how much new government programs cost. From David M. Dickson in the Washington Times:
As President Obama and Congress craft the largest national health insurance program since the creation of Medicare and Medicaid in 1965, they insist that the final product will add “not one dime” to the federal deficit.
But cost projections are notoriously unreliable, and history is filled with examples of federal programs – especially in health care – that cost far more than originally predicted.
In 1965, the House Ways and Means Committee estimated that the hospital insurance program of Medicare – the federal health care program for the elderly and disabled – would cost $9 billion by 1990. The actual cost that year was $67 billion.
In 1967, the House Ways and Means Committee said the entire Medicare program would cost $12 billion in 1990. The actual cost in 1990 was $98 billion.
In 1987, Congress projected that Medicaid – the joint federal-state health care program for the poor – would make special relief payments to hospitals of less than $1 billion in 1992. Actual cost: $17 billion.
The list goes on. …
“Models were not adequate to capture the complex interrelationships” among patients, doctors, hospitals, pharmaceutical firms, medical-device manufacturers and other major players in the health care system, he said.
The major actors – including patients, doctors and hospitals – quickly learned how to use Medicare to their best advantage, which caused costs to outdistance projections, said Joseph Antos, a health care policy analyst at the American Enterprise Institute.
Financial incentives affecting these actors played a major role.
“The most dangerous words you can utter in a doctor’s office are, ‘It might help, and it won’t cost you a dime,’ ” Mr. Antos said. …
The most famous example of a federal health program coming in below estimates is Medicare’s Part D prescription-drug program, which Congress enacted in 2003. Part D’s actual costs have been lower than CBO’s estimates.
A major reason for this trend “is likely a reflection of the competition that’s occurring in the private market,” said CBO Director Peter Orszag, who is now the White House budget director.
The Medicare drug program “represents the one time Congress almost entirely relied on private competition to hold down costs,” said James Capretta
Read the whole article: U.S. health plans have history of cost overruns.
(Via David Boaz at Cato)
