Beer summits may be safer for our fiscal future

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After the 40-minute “beer summit” last year, our president said, “I have always believed that what brings us together is stronger than what pulls us apart.” It was that kind of “Harvard-student-become president-has-a-beer-with-Harvard-professor-and-a-police-officer” kind of moment. For a wonk like me, the bipartisan health care summit was even more interesting than the improbable beer summit—if you believe anything could be.

There was a much bigger cast of characters at the bipartisan health care summit last week. Over seven hours, they offered a cornucopia of the all the political statements of these politicians in one big dose. This summit discussed reshaping one-sixth of the American economy. That is certainly an important topic, and it’s worth listening to how our Washington politicians look at this. Republicans took 110 minutes to talk. As a whole, including President Obama, Democrats took 233 minutes. So it was still more of a Democrat show. We heard even more from our elegant and eloquent president.

As the letter inviting congressional leaders to the bipartisan health care summit stated:

“…[F]or the first time in history, both the House of Representatives and Senate have approved comprehensive health reform legislation. This is the closest our Nation has been to resolving this issue in the nearly 100 years that it has been debated…”

Considering none of the bills would do much to address 38 trillion dollars in unfunded obligations under Medicare, Medicaid and the Children’s Health Insurance Program, it’s hard to see how these proposals would resolve “this issue.” Not to put too fine a point on the past 100 years, we have passed programs like Medicare, Medicaid, CHIP, insurance regulations, preferential tax treatment for health insurance benefits, programs regulating health information, programs related to health quality, research provisions, prescription drugs, bioterrorism, and all manner of Federal bureaucracy. These current programs cost lots and lots of money and involve a large percentage of Washington, D.C., bureaucracy and regulation.

In 2008, Medicare and Medicaid spending alone was about $650 billion. This is bigger than the GDP of all but the top 17 countries. The CBO also projects that total federal Medicare and Medicaid outlays will rise from 4 percent of GDP in 2007 to 12 percent in 2050. These means the problem will be three times larger.

See, we are already on a runaway train. And the skeptical—including me and many other Americans—don’t want to double down with commitments to more entitlement spending that we can no longer keep. With regard to how the bills address the budget, I commend people to review the useful discussion by Rep. Paul Ryan (R-Wis.), who indicated that certain arguments by protagonists of the legislation are smoke and mirrors. He pointed out issues similar to those I have raised in a prior column regarding misleading statements in the health care debate. In fact, at this very summit there was an example for each of the points made in the prior column. While the president addressed a few of the special deals mentioned in my late January column, the president would leave in place many ugly provisions.

Over an operating 10-year window (2014-2023), the Medicaid expansion and new subsidies in the Senate health care bill would cost $2.5 trillion. The reality is these costs are borne through tax increases and cuts to Medicare. Many Americans will have their money taken from them to offset the new spending. Overall, national health care costs would increase. Also, as stated by the Medicare actuaries in reviewing the House bill, because of the severe cuts to Medicare, “providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and might end their participation in the program (possibly jeopardizing access to care for beneficiaries).” Alternatively, because Medicare cuts would likely have to be reduced to avoid jeopardizing access to care for seniors, the provisions “will likely result in significantly smaller actual savings” than assumed.

That means a future Congress will not be able to let these cuts stand and will have to figure out how to pay for the expansions. Don’t think for a moment this Congress is prepared to actually put forth a credible offset to the new spending. You don’t fix the problem of runaway entitlement by dramatically expanding entitlements.

These purported cuts are not real. Politicians cannot commit future Congresses to these kinds of effects on Medicare. We need to take serious and sustainable measures to reduce health care costs, not just shift the cost to other Americans. Actually reducing health care costs is hard to do politically. Both parties have basically failed at this so far. There are elements of such efforts in the current bills, but they are miniscule relative to the massive increases in spending, taxes, and regulation. If what the protagonists want to do is create trillions of dollars in new spending and bureaucracy, it might be better to have more beer summits and put these current behemoth bills to rest.

Nandan Kenkeremath worked as a senior staff on Capitol Hill for 17 years.