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The deficit ‘super committee’ and health care – Pacific Research Institute

The deficit ‘super committee’ and health care

The federal debt-reduction “super committee” recently held its third meeting to explore changes in the tax code. The 12-member bipartisan panel must find $1.5 trillion in federal savings by Thanksgiving.

Committee members have gone to great lengths to emphasize their differences, but there is still room for agreement. The committee can — and should — focus on proposals that eliminate government waste, fraud and inefficiency.

For starters, the super committee could call for repeal of the CLASS Act. Included as a part of Obamacare, CLASS creates a universal, federally chartered long-term care insurance program.

Initially, CLASS appears to save the government money — some $70 billion over its first decade of existence. But those savings are illusory. Participants pay premiums for five years before becoming eligible for benefits. So CLASS will take in premiums for a full 10 years while paying benefits for just five.

Eventually, the program will shell out more in benefits than it’s receiving in premiums, according to the Congressional Budget Office. By its third decade, CLASS will be adding “tens of billions of dollars” to the federal deficit.

Opposition to CLASS isn’t confined to Obamacare’s foes. Even Health and Human Services Secretary Kathleen Sebelius has acknowledged that it’s “totally unsustainable.”

The panel also should institute reforms that help eliminate fraud and abuse in Medicare. An existing proposal from the Obama administration would provide the Center for Medicare and Medicaid Services with more authority and funding to tackle these problems. A move to this effect could save $9 billion over 10 years.

This effort should be put on steroids. The federal government loses up to $60 billion a year from Medicare fraud alone.

Finally, the super committee should propose optional Medicare premium supports — that is, government-sponsored credits for beneficiaries to use to purchase private insurance. This would inject market competition and cut federal expenses while maintaining quality-of-care.

The share of the federal budget devoted to Medicare and Medicaid is projected to reach 31 percent in 2020. Entitlement spending is on an unsustainable path.

Market-friendly reforms have proved effective at reducing entitlement costs elsewhere. Under the Medicare Part D prescription drug program terms, private insurers offer competing prescription-drug coverage plans. Seniors choose what they like, and the federal government subsidizes their purchases.

The Medicare trustees report that the average monthly premium under Part D in 2011 is just $30 — much lower than the original forecast of $53. A recent CBO analysis pegs the total federal cost for Part D between 2004 and 2013 at 46 percent below initial projections.

Why not apply the same market forces to the rest of Medicare?

While committee members might operate from opposite ends of the political spectrum, proposals like these can form the foundation of a compromise to bring down government spending.

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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