Health ‘reform’ has sent costs soaring

Last Updated: 12:19 AM, September 13, 2011
Posted: 9:58 PM, September 12, 2011

Betsy McCaughey

Overall job growth hit zero in August, but jobs in health care are growing steadily. That would be good news, except that growth in this industry is increasingly paid for by taxpayers or new federal borrowing. And despite the sales pitch to the contrary, the Obama health law is making things worse.

The actuaries at the Centers for Medicare and Medicaid Services now forecast health-care spending to reach 19.8 percent of GDP by 2020, up from 16.6 percent when President Obama took office. And half this spending (49 percent) will be by government.

The actuaries’ predictions suggest that, in the long run, the largest threat to the nation’s solvency isn’t Medicare; it’s the Obama health law’s vast expansion of Medicaid, which will cost more than Medicare once baby-boom demand peaks.

Simply put, the president’s “reform” is converting Medicaid from a temporary safety net to a permanent, taxpayer-paid health entitlement, replacing private insurance.

To frighten the nation into enacting the Affordable Care Act in 2009, the Obama administration falsely claimed that health-care costs were “spiraling.” In truth, the rise in health-care spending was at record lows in 2009 (4 percent) and 2010 (3.9 percent).

The new health law will abruptly change that, the actuaries say. Health spending will jump a whopping 8.3 percent in 2014, the year most of the law’s provisions take effect, with annual increases thereafter averaging 6.2 percent until 2020.

Even these projections understate the problem, in part because they assume a cut in the rates that the government pays physicians -- reductions that have always been postponed and probably will be again.

Medicaid spending will rise much faster than Medicare spending in the coming decade, with the two programs costing about the same by 2020. That’s amazing, considering the wave of baby boomers entering Medicare.

Again, Obama’s law is the main cause. It makes more people eligible for Medicaid and raises benefits so that the program’s spending will top $900 billion in 2020 (state and federal), up from $343 billion in the last year of the George W. Bush administration. The actuaries estimate that Medicaid enrollment will reach 75 million in 2014.

The president promised to reduce the number of uninsured by making health plans more affordable. But twice as many of the uninsured Americans will gain coverage by enrolling in Medicaid as by entering private plans.

The actuaries also caution that some workers and their families will be forced into Medicaid when large employers drop coverage and choose to pay the $2,000 penalty, a sum far smaller than the expense of providing what the Obama law deems “essential” coverage.

That’s the choice Andrew F. Puzder, head of CKE Restaurants, a 3,200-unit chain, will face. He told Congress that complying with the Obama health law’s definition of adequate coverage in 2014 would raise his company’s health-care costs by 150 percent. In other words, the law “explicitly makes labor more expensive.”

Estimates vary on how many employers will drop coverage. McKinsey & Co. found that 30 percent to 50 percent of employers polled were considering dropping coverage in 2014; Towers Watson, another consulting firm, found 9 percent, and Lockton Benefit Group reported 19 percent of its mid-market clients likely to drop coverage.

When employers stop providing insurance, workers with low household incomes (below $30,500 for a family of four) will qualify for Medicaid under the looser eligibility rules. Medicaid rolls could swell greatly beyond the actuaries’ already alarming predictions.

The actuaries also forecast that as government pays for a larger share of health care, government spending on health-care administration -- bureaucrats and regulation -- will soar from $29 billion in 2008 to more than $71 billion in 2020, more than the entire budget for the Medicare Part D drug benefit last year.

The congressional deficit-reduction “supercommittee” should make repealing the vast expansion of Medicaid under the Obama health law its first target. This expansion has received little public attention, but it is the costliest part of the law. The best time to reform this entitlement is before it goes into effect.

Betsy McCaughey, a former New York lieutenant governor, is author of “The Obama Health Law: What It Says and How to Overturn It.”