The Looming Budget Battle Over Health Care

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The Looming Budget Battle Over Health Care

Monday, April 16th, 2012 - 10:20
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Monday, April 16, 2012 - 10:14
The Congress and the President will have to fashion a sustainable way forward following the 2012 general election.

After the election this November, the US will face a “perfect storm” in the ongoing battle to control the federal budget, and a serious plan to control health care spending—long postponed—will have to be on the table.

• At the end of this year the Bush tax cuts will once again expire unless Congress extends them.
• Also at year’s end, the payroll tax cut will again expire.
• The pesky alternative minimum tax, which is a nearly flat tax imposed on incomes above an exempt amount and keeps creeping further down the income ladder, will be up for reconsideration at the end of the year. Arresting the growing reach of this 1982 law would cost the federal government a lot of money.
• The so-called “doc fix,” or accounting for what is now well over $300 billion in previously scheduled, but always deferred Medicare cuts to physician fees accumulated under a formula established in 1997, will again come due at the end of the year.
• The need to increase the federal debt ceiling will be back on the table in 2013.
• The US still lacks a credible plan for redesigning Medicare, Medicaid, and Social Security to achieve long-term budget stability and fiscal solvency in these programs.

Everyone who has looked carefully at these challenges realizes that taking the easy way out on all or most of them—extending or enriching tax cuts and failing to redesign the major entitlement programs—will translate into an explosion of federal debt to unprecedented levels—well more than twice the size of our economy. The growth in interest payments on the federal debt would swamp our social and national security commitments, and/or force enormous tax increases down the road.

For the next six months we will likely witness the blame game and inaction. But after the election, our elected leaders will run out of excuses, and will be forced by budget deadlines, credit rating downgrades, and the very real threat of rising interest rates to get down to work. And when they do, they will need to start with long-term health care cost control. We need to design the blueprints right now that go beyond the cost-shifting plans now on the table to address the underlying health care cost drivers.