In his State of the Union address, Barack Obama said the key to winning the future is to make sure we are not "buried under a mountain of debt." Fittingly, he made that comment right after praising his own health reform legislation, which he said "finally prevents the health insurance industry from exploiting patients." Great campaign rhetoric intended to appeal to both sides of the political aisle, even if it irks insurers (who should be used to it by now). But if he expects to seriously address the debt problem he will have to do better than simply patching some of the rough spots in the Affordable Care Act.
The President thought he could get away with this in the speech because the Bowles-Simpson Fiscal Commission, for all its other virtues, failed to face health care's political reality. The commission seems to have accepted at face value that future Congresses will do the bidding of the 111th as dictated in ACA, taking painful cuts and not getting credit for program expansions. Even the Congressional Budget Office suspects that is not likely, but they are required to score bills as if they will be fully implemented.
The Fiscal Commission had other options, in theory, but it is difficult for a commission appointed by the President to tell him that his only major policy achievement is part of the problem and not the solution. Their advice? Find some way to fix Medicare's unsustainable "sustainable growth rate" formula so that physicians won't be penalized by past failures by Congress to establish a reasonable policy, and defer difficult decisions to slow health spending until we can't delay action any further.
A Failure To Take Up Serious Ideas To Curb Health Spending
Mr. Obama clearly indicated that he is "eager" to work with the other side, but only to consider limited changes in legislation that needs a major overhaul. He threw a bone to Republicans by mentioning malpractice reform, but he failed to take earlier opportunities to deal seriously with this issue. He hinted at eliminating the ACA's 1099 requirement that has every small business up in arms, ignoring the fact that this was included by Democrats who thought they needed something to make the CBO score look good--unnecessarily, as it turned out. If these are the only health policies you highlight in a major address to Congress, you are not serious about dealing with the fiscal calamity that is staring us in the face.
Not that there are no good ideas to consider. As part of their work on the Fiscal Commission, Rep. Paul Ryan (R-WI) and Alice Rivlin advanced the idea of adopting a budgeted approach to health care entitlements. Since the open-ended promises Medicare gives seniors will ultimately be broken, a careful transition to a premium support system makes more sense than simply allowing the program's financial pressures build to the bursting point. This should seem familiar to the President. In creating the new entitlement to coverage in the insurance exchanges, the subsidies are very generous (and unaffordable) but not open-ended.
The good news about last night's speech is that Mr. Obama acknowledged that government, like families, must live within its means. He admitted that freezing domestic discretionary spending will only help a little. He hinted at the need for Social Security reform, and the options have long been vetted by experts on both sides. He argued that government must become more competent and efficient. All true, and such steps will definitely help if Congress is willing to act responsibly. But ignoring the donkey in the room--health spending that will likely grow even faster with the massive expansion of federal subsidies and government programs--is a disservice to the public, which knows better.
Repeating An All-Too-Familiar Pattern
Although disappointing, we have seen this act before. If there is one thing Democrats and Republicans seem to agree on, it is the need to avoid taking difficult but necessary steps to rein in our mounting federal debt. Why take the heat today for what can be put off until after the election--any election?
With the political divide as wide as it has ever been, there is little hope that entitlement reform can be considered before 2013. The fiscal hole will be deeper, even if the economy improves markedly, and the political barriers to responsible action will be no lower. Perhaps next time will be the charm.
Joseph Antos is the Wilson H. Taylor Scholar in Health Care and Retirement Policy at AEI.