Commission to rein in federal entitlement costs is proposed

Kaiser Health NewsOctober 27, 2009 

WASHINGTON — Amid signs that health care overhaul legislation will do little to slow the growth in health care spending in the coming decade, lawmakers and Obama administration officials are considering tougher steps to rein in soaring budget deficits.

One approach that's attracting widespread attention calls for creating a bipartisan commission to draft proposals to control the long-term costs of Medicare, Medicaid and Social Security. Together, the three programs account for 40 percent of all federal spending other than interest on the national debt.

The recommendations of the proposed commission would command a swift up-or-down vote by Congress. Senate Budget Committee Chairman Kent Conrad, D-N.D., and Republican Sen. Judd Gregg of New Hampshire, the chief authors of the proposal, say they may attempt to attach it to must-pass legislation raising the government's debt ceiling in the coming weeks.

"My concern is the trajectory of our deficits and debt are completely unsustainable and that (while) health care reform helps, it is not sufficient" to control runaway entitlement spending, Conrad said in an interview. "We've got to do much more, and I don't believe it will happen in the regular order. I think it requires a special process."

Christina Romer, the chair of the president's Council of Economic Advisers, said Monday that the White House was interested in the Conrad-Gregg proposal and other ideas floated by Sen. Evan Bayh, D-Ind., to create an entitlement commission next year, despite disappointments in such panels in the past. For now, however, she said, the administration's primary focus is on passing a health care overhaul bill that would extend coverage to the uninsured and impose discipline on health care expenditures.

"That's the most constructive thing we can do to deal with the long-run budget deficit," Romer said after a speech before the Center for American Progress, a policy-research center in Washington. "What we're going to need besides that going forward, there certainly is the Conrad-Gregg commission idea."

The government ended the 2009 fiscal year Sept. 30 with a record $1.4 trillion budget deficit, according to the Treasury Department and the Office of Management and Budget. It's on track to accumulate deficits totaling $9 trillion by 2019. While federal spending in response to the recession and financial meltdown helped drive up the fiscal 2009 deficit, most future problems will be due to rapid rises in entitlement spending on Medicare and Social Security for seniors and Medicaid for the poor and people with disabilities.

U.S. public and private health expenditures are expected to reach $2.5 trillion this year and account for 17.6 percent of the gross domestic product, according to an analysis by the National Coalition on Health Care, a nonpartisan alliance. By 2018, national health care expenditures are projected to soar to $4.4 trillion.

In addition, national health care spending will increase faster than the growth in the nation's economy. Between now and 2018, the average increase in national health expenditures is projected at 6.2 percent a year, compared with a 4.1 percent annual rise in the GDP, according to the health care coalition study.

Obama administration officials have defended the massive government spending over the past year to bail out Wall Street and stimulate the economy as a necessary response to the worst recession since the Great Depression. They've also argued that the health care legislation wouldn't add to the deficit but instead would take the first essential steps toward slowing the rate of growth of health care spending.

The Senate Finance Committee's measure, for example, proposes $404 billion worth of cuts in Medicare and Medicaid over the coming decade; would provide funding for comparative effectiveness research and electronic medical recordkeeping; and proposes an independent Medicare advisory committee to recommend savings measures to Congress.

Many health care experts have discounted the efficacy of those approaches, however. They warn that with a fast-growing population of elderly citizens, spending on Medicare and Medicaid will exceed the entire Defense Department budget by 2019.

"I don't think there's anything in the Finance Committee bill that really makes systemic reforms," said Michael D. Tanner, a senior fellow and health care policy expert with the libertarian Cato Institute, a policy-research organization.

"Even if all that stuff is included, it's a first step," acknowledged James R. Horney, the director of federal fiscal policy at the left-leaning Center on Budget and Policy Priorities, a strong advocate of expanded health insurance coverage. "None of these are silver bullets, but over time those are the kinds of steps we will need to take."

Gregg, the top Republican on the Budget Committee, said the Democrats' effort to extend coverage to millions of uninsured Americans "creates a brand-new entitlement without at the same time controlling the cost and expenditures of existing entitlements," such as Medicare, Medicaid and the Children's Health Insurance Program.

The proposed Bipartisan Task Force for Responsible Fiscal Action would operate in a manner similar to the Defense Base Closure and Realignment Commission, in that its recommendations wouldn't be subject to congressional amendments, Gregg said. Because a three-fifths supermajority would be required in both chambers to adopt the recommendations, the two political parties also would have to work together to address entitlement revisions.

"The simple fact is that these are the types of issues which require people to join hands and jump off the political cliff together, or else it doesn't get done," Gregg said.

Entitlement commissions have had varied success. A bipartisan commission appointed in 1983 succeeded in extending the Social Security trust fund's solvency for several generations by raising the retirement age from 65 to 67, imposing a six-month delay in a cost of living adjustment and requiring government employees to pay into Social Security for the first time.

By contrast, there was no bipartisan consensus about what to do to address the long-term budgetary challenges of providing health care and retirement benefits to the baby boom generation when former Sens. Bob Kerrey, D-Neb., and John C. Danforth, R-Mo., headed up the Commission on Entitlement and Tax Reform in 1994.

Kerrey and Danforth never could muster the 60 percent majority they needed from commission members to send their recommendations on to Congress, and their final report was shelved.

Experts agree that long-term health care and Social Security cost savings would necessitate highly unpopular measures, such as reducing health care benefits and cost-of-living adjustments, boosting taxes and fees, or, in the case of Social Security, raising the eligibility age even higher or increasing payroll taxes.

"Everybody knows what the options are; that's not the problem," said William A. Galston, a senior fellow in governance studies at the Brookings Institution, a public policy research center. "People have known for 10 years what the options are. The question is a political question, not an analytical question."

(Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy-research organization that isn't affiliated with Kaiser Permanente.)

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