Whether the deficits separately forecasted in mid-year reviews by the Congressional Budget Office (CBO) and the White House on Tuesday spell a threat to healthcare reform initiatives on Capitol Hill probably will depend on an individual's political slant. Agreement, though, emerged that immediate action was needed now to stem costs related to escalating Medicare and Medicaid costs.
Overall, the news on the economy was grim. The CBO estimated that the federal budget deficit for 2009 will total $1.6 trillion, which, at 11.2% of the gross domestic product (GDP), will be the highest since World War II. Changes being considered to the "provision of health insurance and healthcare services in the United States could either add to or reduce that imbalance over the long term," CBO said.
Spending for Social Security, Medicare, and Medicaid is expected to rise rapidly over the next 10 years, outstripping the growth of GDP, CBO said. By 2019, this spending was projected to total nearly 12% of GDP, which compares with the current 9% of the GDP. Beyond the 10 year budget window, CBO said the nation would face "further significant fiscal challenges posed by rising healthcare costs and the aging of the population."
Meanwhile, White House Office of Management and Budget (OMB) Director Peter Orszag, wrote in his blog that its mid-season review showed a "smaller 2009 deficit but larger out year deficits" than previously predicted: The 2009 deficit is projected, he said, to be $1.58 trillion--or 11.2% of GDP, which is down from a previously projected $1.84 trillion or 12.9% of GDP.
Orszag added that to avoid making the deficit any worse, the key driver of these long term deficits needs to be addressed: Healthcare costs. "The federal government simply cannot be put on a fiscally sustainable path without slowing the rate of healthcare cost growth in the long run," Orszag said.
He added that is why the president "is insistent that healthcare reform not only be deficit neutral over the next 10 years, but also incorporate changes that will help reduce the deficit thereafter."
This perception was reflected on Capitol Hill as well. Senate Budget Committee Kent Conrad (D-ND) said there "was not much news in the reports” because CBO had projected deficits several months ago. However, he said the current numbers "reinforce the fact that the status quo on healthcare is not an option."
Since healthcare costs continue to grow much faster than inflation, "reform simply must be paid for over the next 10 years and also significantly reduce the projected cost of healthcare over the long term," Conrad said. In addition, he said that "a special process [is needed] that deals comprehensively with all of the causes of our growing national debt--including Social Security, healthcare, and our outdated and inefficient revenue system."
Sen. Judd Gregg (R-NH), the ranking minority member on the Budget Committee, said that the "trillion dollar deficits will only compound the looming crisis on the horizon." He said while the healthcare system does need to be reformed, "we cannot ignore the fiscal realities of our situation...we are in a very deep budgetary hole."
While supporting healthcare reform, he criticized the Democrats for proposing plans that "would only increase government spending on healthcare, not lessen it," and said the country should "proceed with extreme caution" before putting in place a huge and costly new program."
Robert Blendon, ScD, professor of health policy and political analysis at Harvard's School of Public Health, said that the current budget projections will put pressure on the healthcare reform measures "to be deficit-neutral in the real sense."
Since the bulk of the money of the reform bills goes into subsidizing coverage for people who are uninsured, Congress is likely to face a dilemma of how much it will subsidize coverage for people who are uninsured--and if cutbacks are necessary or raised taxes are needed. "You're in a situation where the pressure is on"-- where it may not be possible for Congress to subsidize as "generous a package or as many people as it did before," Blendon added.