Sunday, July 19, 2009

Deficit Neutral Healthcare Reform: A Logans Run For Old People

Peter Orszag, President Obama's budget director, went on record today to describe the House bill on health care reform as "deficit neutral."

Orzag could just be your run of the mill administration lackey lying through his teeth, or he might be telling the truth. Let's assume for a minute he actually believes what he is saying. That means there are two very powerful items in the bill that offset the hundred of billions of extra costs the OMB sees in the legislation.

The cost savings from rationing and denial of care must be much stronger than others have assumed. We know about the provisions to cut back on "end of life" or "extraordinary measures" care. But that would only be a short term savings and that has been taken into account in the CBO estimate anyway. To offset the understood costs, the government would have to limit care to the sick and injured in their prime of life. To do that hospitals would have to close...a lot of hospitals. As long as we have the current number of health care points of entry, costs are going to rise faster than inflation.

Beyond that, the administration must see a gradual reduction in the number of doctors due to over regulation, high taxation, and reduced direct payments as the "government option" drives private insurance from the market.

The real savings, and the point of all of this, is when we start seeing the reduction in life expectancy. Old people cost a lot of money beyond health care: social security and the pensioners from failed companies that we have (and will assume in the PBGC).

Imagine the savings if you could drop a couple of million 80 year olds from social security AND Medicaid simultaneously! Believe me, the administration has and it could be the only basis on which they have deficit neutral projections.

Or they could be lying through their teeth.

Imagine a world...

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