No Healthy Deals

Why are Washington's debt dealmakers ignoring fundamental entitlement reform?

Earlier this year, Sen. Tom Coburn (R-Okla.) left the so-called Gang of Six, an independent team of senators who took it upon themselves to negotiate a proposed debt deal apart from the administration and congressional leadership. But this week, to coincide with the release of the $3.7 trillion deficit reduction plan, the gang wooed Coburn back. According to an anonymous source quoted in Politico, the senator, known for his keen interest in entitlement reform, only rejoined after "ferocious" negotiations over cuts to federal health spending. Coburn reportedly held out until the other members agreed to $116 billion in additional cuts to Medicare and Medicaid.

He should've held out longer. The health care policy tweaks that elbowed their way into the final G6 plan won't restrain the growth of federal health spending enough to make a long-term difference.

Nor is the G6 plan the only debt proposal that fails on this front. None of the debt-deal plans now making headlines call for the substantial health entitlement overhaul necessary to pare back the biggest single driver of the federal debt. Taxpayer-financed health spending is the primary cause of both the growth of government and its mounting debt.

The G6 plan is being billed as a framework, but it's not a very sturdy one. Rather than dismantle the unlimited spending commitment offered by Medicare and Medicaid, the G6 plan calls for Congress to find $200 billion in cuts between the two programs. But it doesn't say where those cuts will come from or how they'll be implemented. Instead, it proposes a number and assumes the cuts will come through—about as pure an example of a magic asterisk as you're likely to see in any Washington budget plan.

Meanwhile, the plan also calls for Congress to come up with an additional $300 billion to "fix" Medicare's physician payment system by permanently getting rid of the program's long-scheduled, long-delayed reimbursement cuts. By most reckonings, this isn't really new spending; Congress has "temporarily" overridden the reimbursement cuts 13 times since 2003, with the temporary measures mostly serving to hide the cost of a long-term fix. But it still means officially adding the full cost of the overrides to the budget.

Regardless, it's not clear that any such cuts would pass a Democratic House, which has voiced strong opposition to anything that looks like benefit cuts to entitlements. President Obama has signaled his willingness to consider some forms of entitlement cuts as part of a deal, and even acknowledged that Medicare "will run out of money, and we will not be able to sustain that program, no matter how much taxes go up." But the cuts he favors would eat into provider payments—and, like Medicare's long-scheduled reimbursement cuts, would be hard to implement. Even a rumored deal to trade a tax hike for a repeal of ObamaCare's health insurance mandate wouldn't fundamentally overhaul the system; at best, it would somewhat weaken last year's law without addressing the two older health entitlements. 

Cut, cap, and balance, a plan favored by House Republicans, is more radical in some ways, but also carefully sidesteps entitlements, including Medicare. The bill proposes requiring Congress to keep total federal spending under a predetermined cap. Legislators would only be allowed to spend a certain percentage of America's total economic output in any given year. But there's a loophole: Those spending limits would not apply to entitlements like Medicare or Social Security, among other big-ticket federal spending items.

Exempting Medicare and Social Security from a plan designed to control the federal debt is like a casino junkie trying to pay off his salary-sized credit card bill by giving up diner food after his nights at the tables. It doesn't address the root of the problem. In 2009, using government data, the Concord Coalition projected that in less than 40 years, spending on the three big entitlements—Medicare, Medicaid, and Social Security—could wolf down a full year of federal revenue all by itself, leaving nothing left for other functions. These already-fat entitlements are threatening to selfishly consume America's fiscal future.

Health entitlements, in particular, are the primary cause of the government's decades of bloat. According to Christopher Conover, a research scholar at Duke University's Center for Health Policy and Inequalities Research, health spending accounted for the entire increase in government's size in relation to the rest of the government between 1966 and 2007.

Want to pare down the size of government? Cut back its health care spending. Want to muffle the exploding federal debt? Same thing. But judging from the supposed debt deals on display this week, few members of any political party have much interest in doing either.

Peter Suderman is an associate editor at Reason magazine.