Obama’s Health Spending ‘Problem’

By WSJ, Editorial

President Obama said a fair bit during the fiscal-cliff negotiations—speaking for 45 minutes in one 50-minute meeting, for example—but today let’s zero in on the claim he kept repeating: “We don’t have a spending problem. We have a health-care problem.” For our money—and yours—those are two of the most remarkable sentences our Orator in Chief has ever strung together.

Not so much on the merits, insofar as the federal government is the largest, and worst, buyer of health care in America. But didn’t we recently have an epic debate on this very topic? It seems only yesterday that the President was saying that health-care reform “is no longer just a moral imperative, it’s a fiscal imperative” and “one of the best ways—in fact maybe the only way—to reduce those long-term costs.”

To be precise, that’s how Mr. Obama put it in March 2009, in a White House speech kick-starting the Affordable Care Act. In May of that year, he drew attention to “one clear, indisputable fact,” which was that “the explosion in health-care costs has put our federal budget on a disastrous path.” He added that disciplining those costs “is essential to reducing budget deficits.”

The Democratic supermajority that ran Congress proceeded to write legislation they said would achieve those goals. A year later, speaking at a pep rally for House Democrats shortly before they voted to pass what he called “one of the biggest deficit reduction measures in history,” Mr. Obama said that “Everybody who’s looked at it says that every single good idea to bend the cost curve and start actually reducing health-care costs are in this bill.”

So why is Mr. Obama invoking a special health-care spending problem now? The rational way of reading his fiscal-cliff refrain is as a concession that his cost-control promises are being repudiated by reality. Entitlement spending is headed up, as are overall U.S. health-care costs.

The health entitlements—Medicare, Medicaid, the children’s state insurance program and soon ObamaCare subsidies—accounted for 21% of the budget in 2012. But that will rise to about 24% this year, and about 33% by the end of the decade. As a share of the economy they’ll grow to 10.4% over the next 25 years from 5.4% today, according to the Congressional Budget Office, even with all those supposedly good cost-control ideas in the Affordable Care Act.

CBO wrote in November that unless these entitlements are reformed, or other spending drastically cut or taxes drastically raised, “deficits will be much larger in the future than they have tended to be in the past.” This conclusion “applies under any plausible assumptions about future trends in demographics, economic conditions, and health-care costs.” Many liberal health experts are already declaring that the Affordable Care Act was only a cost-control prelude.

So at first we thought Mr. Obama might be making a concession by acknowledging an ongoing health-care spending problem. But according to our sources, he didn’t therefore propose X, Y and Z reforms. He seems to believe his own advertising. The White House position is that the government health gnomes now have the tools they need to solve the problem. And that would help explain why Mr. Obama refused to consider more than token reforms in the budget talks in 2011 or after the election.

Nothing in practice supports this delusion. Last week Health and Human Services actuaries reported that national health expenditures rose 4.1% in 2011, the third year of relatively low growth by historical standards. HHS Secretary Kathleen Sebelius did cartwheels, claiming that “the statistics show how the Affordable Care Act is already making a difference.” But the actuaries themselves wrote that the law’s “influence on overall health spending through 2011 was minimal.”

The truth is that this slowdown was an artifact of the recession, as millions lost jobs and employer-sponsored coverage while others made more cost-conscious decisions. Enrollment in consumer-driven high-deductible health plans climbed to 17% of workforce coverage in 2011, up from 8% in 2011. The lull may also be the result of some modest private innovation in the organization and management of patient care.

In any case, it is about to end. Ms. Sebelius’s own actuaries estimate that all health costs will jump 7.8% in 2014 and 6.2% on average annually for the decade thereafter. The federal share of health spending will rise 30% in 2014 alone, which underscores the recklessness of adding a new entitlement when taxpayers can’t afford the old ones.

When the Affordable Care Act passed, Mr. Obama said that “From this day forward, all of the cynics, all the naysayers—they’re going to have to confront the reality of what this reform is and what it isn’t.” They are. He is not.

The country has a spending problem and a health-care problem—and an Obama denial problem.

A version of this article appeared January 13, 2013, on page A14 in the U.S. edition of The Wall Street Journal, with the headline: Obama’s Health Spending ‘Problem’.

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