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Obamacare: Guaranteed to be Over Budget

August 05, 2009

By David Gratzer

“It seems there is a kind of Murphy’s Law of health care legislation:” “If it can cost more than the highest available official estimate, it probably will.”

So concludes a short, readable, and important paper from the Republican staff of the Joint Economic Committee.

The conclusion is well justified. When the British National Health Service was introduced in 1948, forecasts suggested spending of 260 million pounds in 1948/49. Spending was actually 38% higher, for an error ratio of 1.38 to 1.

NHS planners also believed that public health care would eventually save money over time, as people finally were able to see physicians and get preventative health care. NHS spending, for the record, has been on average 3% over inflation for last 6 decades.

And, as the paper notes, American government health-care programs have a tendency to be over budget. Way over budget. Medicare? Medicaid DSH? SCHIP? Massachusetts Commonwealth Care? All, fantastically over budget, by a factor of 1.2:1 to 17:1, depending on the program and the time-frame.

The paper weighs why that might be:

This is not to say the official “scorekeepers” are bad at their jobs. On the contrary, they typically exhibit very high levels of skill, integrity, independence, and professionalism—often working under extremely tight time frames and hectic conditions, and not infrequently amidst a din of interested voices attempting to influence their work.

In some of the above cases—such as the British NHS, the U.S. ESRD entitlement, and the Massachusetts health care reform—initial public estimates appear to have simply underestimated the level of demand for the proposed new benefits, perhaps due to insufficient data or a lack of experience administering benefits of that sort. In other cases, such as Medicare’s creation, the actuaries could not have been expected to factor in future program expansions not actually authorized in the then-pending legislation. And of course, even the best actuary is helpless against a legislative draftsman who delays a new program’s full implementation in order to push a large portion of its costs beyond the last year of the official estimating window.

The full paper can be found here.

With Congress proposing a massive health-care program – the House bill scores at a trillion dollars over its first ten years, $2.6 trillion over a decade when fully implemented – this paper should be required reading in Washington.

Original Source:



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