Health Care Reform Said To Increase Federal Cost

Congress' budget watchdog warned Thursday that Democrats' health care bills would not lower skyrocketing costs and would drive up government spending, undermining one of President Obama's chief arguments for the overhaul.

Congressional Budget Office (CBO) Director Douglas Elmendorf said the plans already released by the House and Senate would keep costs rising at an unsustainable pace, fueling criticism from Republicans and some conservative Democrats that the overhaul will bankrupt the country.

"Today's CBO testimony should be a wake-up call," said Senate Minority Leader Mitch McConnell, Kentucky Republican. "Instead of rushing through one expensive proposal after another, we should take the time we need to get things right - especially at a time when hundreds of thousands of Americans are losing jobs every month."

Meanwhile, a bipartisan group of senators on the Finance Committee ended negotiations for the week without a piece of legislation, putting the aggressive timetable sought by Mr. Obama and Senate leaders in doubt.

House Speaker Nancy Pelosi, California Democrat, criticized the CBO analysis for not calculating the savings from prevention and wellness measures in the bill that proponents say would promote a healthier population.

Still, she said, Congress will look for more ways to keep down costs, which White House officials predicted will alleviate the budget director's assessment.


"I think we can bend the curve more. I think that we definitely can," she said. "And that is what I think we should try to do."

The verdict from CBO, Congress' nonpartisan accountant, also underscored objections from the House's conservative Blue Dog Democrats, whose break with Democratic leaders last week over the high cost of the plan stalled attempts to quickly advance the bill.

Democratic leaders are struggling to placate the faction, which has enough members on the Energy and Commerce Committee to kill the measure.

The Blue Dogs, a group of more than 50, issued a joint statement Thursday pledging its commitment to health care reform but putting Democratic leaders on notice that it is watching every penny.

"We cannot fix these problems by simply pouring more money into a broken system," the Blue Dogs said in the statement.

Mr. Obama has repeatedly said that any reform measure must "bend the cost curve" and has warned that health care costs would continue to skyrocket unless the industry is reshaped.

But Mr. Elmendorf, in testimony before a Senate panel, said "the curve is being raised" by the health bills.

"We do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending," he said. "On the contrary, the legislation significantly expands the federal responsibility for health care costs."

Lawmakers have complained about the CBO throughout the health care debate, whether it's about the time it takes to receive reports or the CBO's reluctance to measure attempts to cut costs.

Meanwhile, a key bipartisan group of senators on the Finance Committee continued negotiations late Thursday. The group was working to find the last $320 billion in payment options on a plan that would likely create a group of insurance co-operatives owned by groups of citizens.

Sen. Max Baucus, Montana Democrat and chairman of the committee, said a deal is close but refused to risk releasing a poor compromise just to meet the timetables. Sen. Charles E. Grassley of Iowa, the Republicans' chief negotiator on the committee, said the Finance Committee's bill is the only one likely to reach the presidents' desk, as other plans have been marred by partisan division.

In testimony before the Senate Budget Committee, Mr. Elmendorf also addressed a recent CBO report that showed federal spending on Medicare and Medicaid would increase from the current 5 percent of gross domestic product to nearly 10 percent in 2035 and to more than 17 percent by 2080.

Without changes in policy, Mr. Elmendorf told the committee, that projection means that in 2080 the federal government would be spending almost as much, as a share of the economy, on just its two major health care programs as it has spent on all of its programs and services in recent years.

"Slowing the growth rate of outlays for Medicare and Medicaid is the central long-term challenge for federal fiscal policy," the report concluded.

By 2013, however, the House health reform bill would require the federal government to pay 100 percent of the cost to provide Medicaid coverage to all non-elderly people with incomes below 133 percent of the federal poverty level who were not currently eligible. This would raise federal outlays for Medicaid by $438 billion, CBO estimated. Federal spending on Medicaid has already increased from $12 billion in fiscal 1979 to an estimated $262 billion in fiscal 2009.

Subsidies to provide insurance for the uninsured would cost the federal government $33 billion in 2013 and $160 billion in 2019, CBO estimated earlier this week.

Mr. Elmendorf told the Budget Committee that cost-cutting reforms in Medicare and Medicaid were not nearly enough to offset rising federal costs mandated by the new bills, especially over the long term.


In May, Medicare trustees reported that the net present value of Medicare's unfunded obligations through 2083 totaled $38 trillion. That's the amount of money that would have to be deposited today in an interest-bearing account in order to finance these unfunded commitments over the next 75 years.