Tuesday, November 25, 2008

Stimulus Spending and Health Care

Last week I was saying we were facing a $1 trillion budget deficit in the current fiscal year and that made health care reform problematic.

This week, the operative number is $2 trillion.

It was $1 trillion before reports that the President-Elect would be looking at a stimulus bill in the $700 billion range as well as reports his planned income tax cuts are on track and his planned income tax increases for those making more than $250k are likely to be delayed.

First, I mean no criticism here. We are clearly on the way into the worst recession since the Great Depression. All efforts to date have not budged consumer or business spending and I don’t have an alternative to a big stimulus package.

In his news conference today, the President-Elect talked about the importance of any stimulus spending being one-time and not recurring in order that the longer-term deficit doesn’t grow even more. He also talked about getting a “twofer”—stimulus and at the same time an investment in something constructive.

The example he used was in health care. Spending some money to expand the use of health information technology would be a stimulus in that money would be spent on computers, software, training, and so on, and at the same time it would be an investment in making our health care system more efficient.

There are many people arguing that we need to spend big money on a comprehensive health care reform plan that will cover many more people—an entitlement expansion—now. My read is that any entitlement expansion is, by definition, off the table as part of any stimulus spending.

I expect the Obama administration will not discourage Congressional efforts for a big health plan bill.

But I see a smaller scale down payment on health care reform more likely than a larger bill—because a consensus on what health care reform should look like and how it would be paid for will continue to prove to be elusive.

When the day is done I expect the administration's efforts will be more focused on making the health care system more affordable and efficient—a “twofer”
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