The Federal Budget's Pre-existing Health Condition

With the latest grim set of federal deficit numbers out, critics are arguing that the government doesn't have the money to reform health care, and may have to put off the idea. And that may be true. But it's also true that health care will break the federal budget if the government does nothing at all.

The latest projections on the federal deficit and national debt are pretty appalling, and they're being driven by the "great recession" (federal tax revenues plunged 17 percent this year, the worst drop since the Great Depression) and federal stimulus spending to try and head it off.

But we went into this recession – and this health care debate – with the financial equivalent of a pre-existing condition. Even before the recession, even before the stimulus effort, financial experts said the federal budget was unsustainable over the long term. The combination of rising health care costs and an aging population is going to push spending on Social Security and Medicare out of sight, and Medicare - since it gets hit by both health costs and demographics - is by far the bigger problem.

Just to put it in perspective, the government's own financial reports say that if you decided to fix Social Security today by raising taxes or cutting spending, it would take a 16 percent in the Social Security tax, a 13 percent cut in benefits, or a combination of the two. By contrast, if you tried the same thing with Medicare, you'd need to raise the Medicare tax 134 percent or cut benefits by 53 percent. Medicare's revenues already don’t cover its costs, and the program is drawing down on its "trust fund," which will run out in eight years. After that, the government will be faced with stark decisions on how to pick up the tab.

This is what's lurking behind the appalling wonky phrase, "bending the cost curve," that's been thrown around in the health care debate. It means that Medicare's fortunes are linked to the overall costs of health care, and if we can cut costs or even slow down their growth, we can change these grim projections.

That doesn't mean the nation has to embrace the health proposals currently in Congress. But avoiding spending on health care reform doesn't mean we won't have to spend money on fixing Medicare. The inevitable logic of the numbers means something will have to be done. And the longer we wait, the more wrenching the choices will be.