It takes some nerve to claim that a massive new federal entitlement is going to save the taxpayers money, but anything goes in Washington when it comes to political rhetoric. Everyone is talking about how the CBO is claiming that the President's new health care plan is going to save $1.3 trillion. No joke.
But here is Fred Barnes explaining this whole process of claiming how thrifty you are going to be when you pass entitlement legislation and how taxpayers end up buried underneath the bills when the big federal program gets a good head of steam:
Take Medicare, enacted in 1965. The initial projection was it would cost $9 billion a year by 1990. The actual figure for 1990 turned out to be $67 billion. According to the Congressional Budget Office, the baseline for Medicare in 2010 is $521.3 billion, which includes $55.3 billion for the prescription drug benefit approved in 2003.
Or take one part of Medicare, the End Stage Renal Disease program (ESRD) that entitles every sufferer, regardless of age, access to dialysis. It was created in 1972 and its spending for 1974 was projected at $100 million. The real cost was $229 million. In 2007, ESRD cost $23.9 billion, nearly 6 percent of Medicare’s overall spending that year.
Or take Medicaid’s program of “disproportionate share hospital” payments. Passed on 1987, it was projected to cost less than $1 billion in 1992. Its actual cost in 1992: $17 billion. The program’s cost would still be ballooning if it hadn’t been brought under control by the Balanced Budget Act of 1997.
These faulty projections are not exceptions to the rule. They are the rule. The projection for the first year (1948) of the National Health Service in Britain was 260 pounds, far below the real cost of 359 pounds. The under-projections have continued to miss the actual demand for health services.
In Massachusetts, the universal coverage plan was predicted to cost $472 million in 2008, but the price tag turned out to be $628 million. Now Governor Deval Patrick wants to cap insurance rate increases to less than 5 percent annually, which would force insurance companies to cut payments to providers or quit the program. In 1994, Tennessee sought to control Medicaid spending with a new program called TennCare. By 2004, costs had more than tripled.
Read the rest here.