Prescriptions for disaster

Don’t buy the claim that the Senate health-care bill is substantially more moderate than the House measure. While Speaker Nancy Pelosi’s legislation is even more onerous than the package created by Sen. Max Baucus and now championed by Senate Majority Leader Harry Reid, the larger story is how similar the two Democratic bills are.

First, we need to get past the misleading accounting games. Each bill is routinely “scored” for its 10-year costs from 2010-19. Yet this includes several years when the spending wouldn’t yet have kicked in. According to the Congressional Budget Office, fully 99.9 percent of the Pelosi bill’s costs would hit from 2013 onward. Similarly, 98.3 percent of Reid’s spending would come after 2014.

If you start the tally when the bills’ spending would actually start (in 2013 for the House bill and 2014 for the Senate bill), then the bills’ real 10-year costs become clear — and are remarkably similar.

The CBO reports that, in their true first 10 years, the House bill would cost $1.8 trillion, and the Senate bill would cost $1.7 trillion. Pelosi would raise Americans’ taxes by $1.1 trillion over that period, while Reid would hike them by $1 trillion.

And the House bill would siphon about $800 billion from Medicare to spend it elsewhere, while the Senate bill would suck out about $900 billion.

So the financial bottom lines are almost the same.

And if we discount the bills’ claims to divert hundreds of billions of dollars from Medicare (which is already on the edge of insolvency), the CBO says the House bill would raise our national debt by about $650 billion in its real first decade, while the Senate bill would up it by $740 billion.

So, the bills would either sock older Americans by taking huge sums of money from Medicare — or hit future generations with huge tax hikes to cover the shortfall.

Whether it’s our grandparents or our grandchildren, someone is going to pay.

To give an idea of how much $1.7 (or $1.8) trillion is, let’s compare it to private insurance companies’ profits. The 10 largest insurance companies in America (according to the Fortune 500) last year had combined profits of $8 billion. You could double that, and it still would be less than 1 per cent of $1.7 trillion.

The House and Senate bills are similar in another important way. Each seems to mandate that insurers cover all comers at any time, at only nominal added cost for waiting to sign up.

This would provide a perverse incentive for young, healthy people to avoid carrying insurance — knowing that they could just wait until they’re sick or injured and buy it then. Without question, that would cause premiums to skyrocket for most Americans who now have insurance.

Recent studies by PriceWaterhouseCoopers, Oliver Wyman and Wellpoint all support this conclusion. Top Democrats in Congress dispute those findings — so they should agree to let the CBO do an independent study of the question, before any floor vote on the legislation.

Yes, the House and Senate bills differ in many ways, with the Senate approach being generally a bit less regulation- and bureaucracy-heavy. But it’s really just a question of degree — and either one is more than capable of sinking our already badly leaking federal budget.

Benjamin E. Sasse, a former US assistant secretary of health, advises private-equity clients and teaches at the University of Texas. Jeffrey H. Anderson, director of the Benjamin Rush Society, is a senior fellow at the Pacific Research Institute.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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