"We don’t have a deficit problem, we have a health care spending problem"

Aaron Carroll writes:

Let’s say it again – we don’t have a deficit problem, we have a health care spending problem.

If there’s one thing that people should know about the long-term US budget, that’s it. Carroll has a nice graph, showing the long-term budget deficit if health-care cost inflation continues on its long-term trend (complete budget disaster) compared with what happens if health-care costs grow only at the average seen in other rich nations (no deficit problem at all).

Of course, you can eliminate the effects of health-care inflation on the federal government budget by slashing Medicare benefits (or Medicaid, or the new Affordable Care Act subsidies). That “works” just fine in terms of the federal budget, but is an utter failure of public policy if all it does is shift costs. Just as the federal government budget ultimately just can’t handle exploding health-care costs, individual Americans can’t, either. Which goes back to reasons why thinking of the federal government budget as similar to either a family budget or a business’s budget doesn’t work at all; the goal of the nation simply isn’t to maximize federal government profits (as a business would).

Carroll has plenty about the evidence — he considers it mixed but overall encouraging — that the ACA and other factors are contributing to help with all of this. He also makes the important point that reducing cost inflation is all very difficult to do because waste, fraud, and inefficiency don’t mean that money just disappears; it all goes into someone’s pocket, and, some fraud excepted, most of the people who profit from exploding health-care costs aren’t really doing anything that’s obviously “wrong.” Not to mention that those profiting from the status quo have a much stronger and immediate incentive to oppose reform than the rest of us do to support it. In my view, it’s a strength of our Madisonian democracy that it tends to be overresponsive to intense preferences, but it does create problems in this sort of situation, especially when the topic is so complex that even the experts aren’t really sure what the best steps might be. Such difficulty doesn’t mean that reform is bad; it just makes it legitimately very hard. It is no surprise that even after passing Congress and getting enacted into law, and even after surviving a court challenge, health-care reform is still at risk.

But, yes, the need to cut health-care cost inflation is real: you can tinker, even substantially, with taxes; you can slash federal government spending as much as you want. But if you think you’re doing that to solve the deficit problem, you’re just wrong, because there is no deficit problem. It’s a health-care spending problem. 


Success! Check your inbox for details. You might also like:

Please enter a valid email address

See all newsletters

Show Comments
Most Read


Success! Check your inbox for details.

See all newsletters