Second, the Medicare projections assume that the 2010 Affordable Care Act (ACA) will reduce health-care cost growth by 1.1 percent per year, despite doubts voiced by the GAO and a panel appointed by the Medicare board of trustees.
The panel and the GAO recommended including an alternate scenario in the year-end figures, in which the doc fix continues and the ACA cost reductions do not materialize. The result is a $12.4 trillion increase in the cost of the promises, to more than $46 trillion. Given Congress’s history with the doc fix, and the general paralysis in Washington, it’s hard to argue with the GAO’s lack of confidence in Congress’s ability to honor its own cost controls.
If the government were a company, its huge and growing off-balance-sheet liabilities would set off alarm bells. But investor confidence has not been lost — Treasurys can still be sold at very attractive yields.
Confidence has been shaken, though, among the American people. Congress’s approval ratings are at record lows. Anger is flaring across the political spectrum, reflecting a sense that something has broken in our country.
In such an environment, is it right to release critical financial information the Friday before Christmas? Is it acceptable that politicians are not required to describe the cost of the promises they have made?
In 1990, the government required that companies begin to account for the net present value of retirement promises, not just current-year cash flows. General Motors began complying in 1992; and it recorded a $33.1 billion (pretax) charge to reflect the value of its promises up to that point, which led to what was then the largest annual loss in U.S. corporate history. Seventeen years later, the “free until accounted for” promises were a major factor in GM’s bankruptcy.
The United States is stronger than General Motors. And the good news is that small changes in health-care cost trends have a large impact on the government’s long-term promises. Our system is fixable. But our politics are toxic, and each side is dug into an ideological trench. In such an environment, when hard choices need to be made about promises and taxes, why should information be buried in an appendix?
Americans deserve better. One way for Washington to start earning back our trust is by giving us all the information, even if it is unpleasant.