Last week, I had the opportunity to testify before the House Committee on Ways and Means on issues related to rising health care costs. Click here to see my complete written testimony and videos of my statements before the committee.
In my oral remarks, I explained how well-intended government policy aimed at making coverage and care more affordable often does the opposite, using several examples on how the Affordable Care Act significantly increased health care premiums and deductibles while leading more people to obtain non-emergency care in emergency rooms.
The key focus of my testimony was how poorly designed government programs have increased health care prices, health insurance premiums, and overall spending. I contrasted the large price increase in health sectors, particularly for hospital services, with other sectors of the economy where the government’s role is minimal and inflation-adjusted prices have declined while quality has improved.
I asked members of Congress to keep two principles in mind. First, that policy changes always have unintended consequences. Second, that when government subsidizes something, it becomes more expensive as subsidies increase demand, raise prices, and increase total spending.
I closed my testimony by urging Congress to trust people and let Americans have the freedom to spend their own money on the health care and coverage they choose.
Paragon Proposes Meaningful Health Reforms
We need solutions. Federal health spending continues to escalate even though it’s increasingly clear we get poor results from all our spending. Paragon’s new report, Turing the Tide on Red Ink: Commonsense Policies to Make Federal Health Programs More Sustainable, lays out a dozen proposals that would improve incentives within the health sector and improve the value that beneficiaries and taxpayers receive from these programs. Most of these proposals have received past support from both parties, and they would not necessitate any changes to federal benefits.
Paragon’s resident Medicare expert Joe Albanese discussed several Medicare reforms in a recent Washington Examiner op-ed, “Basic Fixes to Start Saving Medicare”. And in an op-ed in The Hill, I wrote a piece yearning for the return of the Joe Biden who supported commonsense entitlement reform.
Biden’s current position to oppose entitlement reform is very different from the position taken by then-President Obama, who in early 2010 said, “Almost all of the long-term deficit and debt that we face relates to the exploding costs of Medicare and Medicaid. … And if we don’t get control over that we can’t get control over our federal budget.”
My piece discusses Biden’s past support for eliminating a Medicaid scam—the Medicaid provider tax—that permits states to pass large costs to the federal government. For more on that issue, I encourage you to read the op-ed as well as a longer paper, Medicaid Provider Taxes: The Gimmick That Exposes Flaws with Medicaid’s Financing, I wrote on the issue for the Mercatus Center in 2016.
Biden Fails to Propose Serious Medicare Reforms
Joe Albanese also evaluated the Medicare proposals in President Biden’s fiscal year 2024 finding that they do little to make Medicare sustainable for future generations. In a Forbes op-ed, Joe and I wrote:
“The rising cost of federal health spending is the single greatest fiscal challenge the U.S. faces. Aside from interest payments, unsustainable spending in programs like Medicare and Medicaid is the biggest driver of federal debt. Reforms to slow this spending must happen soon, or painful cuts will become inevitable to avoid a fiscal crisis. Ignoring this problem is not “protecting” Medicare…
Biden’s purported solution for Medicare’s hospital insurance trust fund does not actually reform hospital payments. Instead, it redirects tax revenues and drug savings from elsewhere in the budget without addressing the underlying factors that are driving fiscal unsustainability. Finding new ways to pay for overspending is not enough for the long-term. The key is stopping the overspending.
Not only does the Biden budget fail to stop overspending, but it also fails to offset the last two years’ massive new health spending. Even with the budget’s proposed total savings, the national deficits over the next decade are expected to be $17 trillion, about $4 trillion more than where Biden started.
Each of Biden’s budgets have ignored the problem of unsustainable federal health spending. Specific proposals to achieve health savings were virtually nonexistent in his first two budgets, and this budget fails to reform the vast majority of Medicare spending. Even the Obama and Trump administrations managed to identify common areas of reform, such as preventing hospitals for overcharging for services that can be performed in doctors’ offices.”
