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Wednesday, October 21, 2009

Small Biz Health Care Daily: Government Health Care and Cost Overruns

When government gets more involved in health care, there’s one thing you can be sure of, i.e., costs will run far – and I mean far – ahead of initial projections.

It is important to read an October 20 Wall Street Journal editorial titled “Health Care Costs and History.” It took a look at Uncle Sam’s cost overruns. Consider the following:

• “…let's examine the record of Congressional forecasters in predicting costs. Start with Medicaid, the joint state-federal program for the poor. The House Ways and Means Committee estimated that its first-year costs would be $238 million. Instead it hit more than $1 billion, and costs have kept climbing.”

• “Thanks in part to expansions promoted by California's Henry Waxman, a principal author of the current House bill, Medicaid now costs 37 times more than it did when it was launched—after adjusting for inflation. Its current cost is $251 billion, up 24.7% or $50 billion in fiscal 2009 alone, and that's before the health-care bill covers millions of new beneficiaries.”

• “Medicare has a similar record. In 1965, Congressional budgeters said that it would cost $12 billion in 1990. Its actual cost that year was $90 billion.”

And the list goes on and on. The Journal notes that one of the few programs to come in under budget, so far, is the Medicare prescription drug program, and that has been due to competition in the private market. Get rid of that private competition – which many in Congress would like to do – and those costs will skyrocket as well.

Hmmm, private market? Is there a lesson here? Perhaps elected officials should be looking to reforms that will expand private choice and competition in health care, rather than expanding government's role.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

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