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Health Care Tops Fiscal Need List
Medical Costs Threaten the Nation With Bankruptcy, White House Says at Summit

By Lori Montgomery and Amy Goldstein
Washington Post Staff Writers
Tuesday, February 24, 2009

President Obama will make reforming the U.S. health-care system his top fiscal priority this year, administration officials said yesterday, contending that reining in skyrocketing medical costs is critical to saving the nation from bankruptcy.

At a summit on "fiscal responsibility" convened by the White House, top administration officials said they also are committed to stabilizing the Social Security system and to revising a tax code that generates too little money to cover the cost of government.

But the White House offered no timetable for those goals and few explicit ideas for how to achieve them, disappointing some lawmakers and other participants, who had hoped the summit might produce greater momentum to fix the chronic imbalance between government spending and tax collections that is driving the national debt to dangerous levels.

Instead, the 3 1/2 -hour session was designed to demonstrate that the White House could foster a civilized conversation among an ideologically diverse group of lawmakers, academics, economists and interest groups. Obama assured the more than 100 participants that the debate over the nation's long-term financial health "doesn't end when we go home today."

"We've got a lot of hard choices to make," Obama told them. "We need to build off this afternoon's conversation and work together to forge a consensus."

The White House budget director, Peter Orszag, delivered a forceful argument for keeping Washington's focus, for now, on slowing "the growth rate in health-care costs," calling it "the single most important thing we can do to improve the long-term fiscal health of our nation."

"Let me be very clear: Health-care reform is entitlement reform. The path of fiscal responsibility must run directly through health care," Orszag said.

Although the $787 billion stimulus package approved by Congress this month, along with bailouts for the nation's financial system, has bloated this year's budget deficit, administration officials and many outside experts contend that the rising costs of Medicare and Medicaid, the federal health programs for the elderly and the poor, present a far greater threat to the nation's long-term financial stability.

Most of the spending on the stimulus package will run out after a few years; the $700 billion the Treasury Department is investing in banks and other financial institutions promises to pay some returns to taxpayers. But health-care costs for the retiring baby-boom generation are inexorably rising.

Left unchecked, they will quickly push the annual budget deficit to unsustainable levels, and expand the debt owed to foreign governments and other private investors to 300 percent of the nation's gross domestic product by mid-century, Robert Greenstein, executive director of the Center on Budget and Policy Priorities, said at yesterday's summit.

"The recent economic recovery package is not driving the problem," Greenstein said. "The increases projected in federal spending in coming decades as a share of the economy are due entirely to the projected growth in Medicare, Medicaid and Social Security -- which in turn is driven by rising health-care costs and the aging of the population."

Still, with this year's deficit projected to approach a record $1.5 trillion, Obama said he would reduce the budget gap to $533 billion by the end of his first term in office. He then released his guests to five "break-out sessions," each led by top administration officials, to discuss issues related to health care, Social Security, the tax system, government contracting and the budget process.

At the session on Social Security, White House economic adviser Lawrence H. Summers said the downturn in financial markets has dampened enthusiasm for Republican proposals to convert part of Social Security into private retirement accounts, creating a political opening for other kinds of restructuring.

Gene Sperling, a senior Treasury official, said he would like to reprise an idea that surfaced a decade ago: creating tax incentives for Americans to set aside money for retirement, in addition to their Social Security payroll deductions. With anxiety high over savings and housing values, he said, the public may be more supportive of changes that would reduce their Social Security benefits if the program were made more stable in the long run.

"I think there may be a lot more openness than we thought in the past for people to have an honest discussion about the shared sacrifice," Sperling said. Participants in the session debated a variety of ideas, including raising the age at which people qualify for Social Security, cutting benefits for wealthy retirees, slowing annual increases in Social Security payments and devoting more revenue to the program.

But Summers and Sperling backed away from a strategy the White House had floated in recent days: a task force to examine alternatives to the retirement system.

"This is not about getting a commission," Sperling said. "It is finding a process of trust, where Democrats and Republicans can . . . present something together . . . holding hands and jumping together."

At the other sessions, administration officials staked out few positions. For example, in a discussion of tax reform led by Treasury Secretary Timothy F. Geithner and Christina Romer, chairman of the Council of Economic Advisers, Rep. Charles B. Rangel (D-N.Y.) said he is "very anxious to see what direction the administration wants to go on health care."

"I think I'm allowed to say: We have not made those decisions yet," Geithner told the chairman of the House Ways and Means Committee. "Obviously, we're going to do health care. But on the tax side, beyond that, we really are looking for areas where we can make meaningful progress. That's why we wanted to start by hearing from you."

Despite the lack of specifics, some participants praised the administration for focusing on issues that have long been ignored.

"To me, the overriding news of the day is we have a president who says there is a fiscal crisis and the buck stops here," said William G. Gale, a tax expert at the Brookings Institution.

But some lawmakers said they would prefer more clarity about how to move forward.

"How do we address it? That is the $64,000 question," said Sen. Kent Conrad (D-N.D.), chairman of the Senate Budget Committee.

Staff writer Anne E. Kornblut contributed to this report.

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