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Healthcare reform: Prescription for deficit reduction?

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As the struggle to come to a consensus on healthcare continues, experts remain divided as to the net effect healthcare reform would have on the national debt. Those supporting Senate Majority Leader Harry Reid’s plan contend that it would reduce the burdensome healthcare costs now facing both the federal government and the individual.

Those against the plan assert that, even if costs were brought down, it would not occur quickly enough, and that in the short term, Washington would be saddled with a $200 billion annual healthcare commitment on top of the expected increase in costs caused by an influx of aging baby boomers.

Upon examination of the bill, the nonpartisan Congressional Budget Office reported that expenses would be fully paid for by spending cuts and tax increases sufficient to cover an additional 30 million people, this to the glee of Democrats. However, the CBO also determined that the bill would not significantly curtail the country’s record deficit. According to Isabel Sawhill of the Brookings Institution, “The hope that healthcare reform would take care of our budget problem has evaporated.”

Those with an eye toward to the budget fret that the legislature may be unwilling to keep the plan deficit-neutral. Already Republicans are planning an amendment that would eliminate more than $400 billion in proposed Medicare cuts, a move that would cripple the bill’s proposed financing.

Furthermore, a version of the bill which was drafted in committee, significantly waters down two of the main cost-cutting provisions: a tax on high-end or “Cadillac” policies (opposed by labor unions) and an independent commission whose goal would be to contain Medicare costs. Administration officials have demanded such provisions but have faced strenuous opposition by House leaders.

“I do give them credit for shooting for deficit reduction as a target,” said the nonprofit Concord Coalition’s Robert L. Bixby. “But this bill is not bending the cost curve. Even if these things work, it’s not of the magnitude that is needed to prevent us from going over the cliff.” The White House retorted with evidence gleaned from a new study by Massachusetts Institute of Technology economist Jonathan Gruber that the bill would cut hundreds of dollars from annual insurance premiums in the individual market.

White House Budget Director Peter R. Orszag emphasized that health reform was never intended to reduce deficits immediately but instead avoid a budgetary crisis decades down the road. “The legislation is reflecting all the ideas that have been put forward in health policy circles for years and creating a feedback-and-continuous-improvement loop that will allow us to learn as we go,” he said. “When someone says it’s not guaranteed to work, my response is: Doing nothing is guaranteed to fail.”


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