Wednesday, June 10, 2009

Raising Taxes to Pay for a Health Care Bill--Apparently the Congress Wouldn't Be Able to Find a John Deere in a Hay Stack

Why Do We Need to Raise Taxes to Pay For a Health Care Bill in a System That Has $10 Trillion in Waste?

White House Budget Director Peter Orszag has promised in the next few days to detail just how the administration would like to see health care reform paid for.

There are some people who question whether he will play it straight or play games with those numbers—will the list really be scoreable?

He will play it straight. You only need look at the comprehensive and highly regarded December Congressional Budget Office (CBO) report he put his signature on, as the then CBO director, that detailed 115 health care reform options to know that.

But the White House list of health care reform pay-fors will undoubtedly also have a number of new taxes to pay for as much as half the cost of a health care bill. Because the Congress has been unable to do much toward getting the waste out of the system, and therefore needs billions more, there will be lots of tax increases on the list.

Let me be clear, using the tax system to drive people to more efficient health plans could be good policy. But most of the tax increases on the list are just plain tax increases.

So, as we await word on just which new taxes the White House and Congress will propose to pay for a health care bill, consider this.

The Centers for Medicare and Medicaid (CMS) has said that our health care system will cost $2.5 trillion in 2009. CMS has also projected that we will pay $4.3 trillion at current trends in 2018. A little simple math says that we will pay out about $35 trillion over the next ten years.

About half of that—or $17 trillion—will be paid by government under existing programs.

Most experts estimate that the final health care bill will cost at least $1.2 trillion over those same ten years. It looks like the Democrats are getting ready to propose paying for half the cost of a health care bill with new taxes.

So, out of that $35 trillion we can’t find a little more than a trillion dollars in savings to pay the full cost of a health care bill?

Just taking the $17 billion that government will pay over the next ten years, we can’t find a trillion dollars there either?

Most experts agree that our system costs so much because we waste something like 30% of what we now spend.

At 30% in waste, that would mean that of the $35 trillion we will spend on health care over the next ten years there is more than $10 trillion in waste. Just in the $17 trillion government will spend on health care there would be more than $5 trillion in waste.

Just think about the logic of that for a moment.

It appears we are on our way to a $600 billion to $800 billion tax increase for a health care bill because we can’t find that amount of money in a system that will waste $10 trillion over the same period.

I don’t think these guys could find a John Deere in a hay stack.
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