Healthcare Costs Driving US Budget Deficit

The United States healthcare system's lopsided delivery costs are the primary driver behind the nation's long-term budget deficits, according to a new report.

Researchers at the Center for Economic and Policy Research (CEPR; Washington DC, USA) have released a statement that claims that the projections of long-term deficits are entirely dependent on projections of exploding health care costs, mostly as a result of the implementation of the Affordable Care Act (ACA). According to the statement, if the United States had per person health care costs that were comparable to costs in other wealthy countries (all of whom enjoy comparable or better health outcomes), then the United States would be looking at long-term budget surpluses, not deficits.

A CEPR infographic released with the statement compares some recently proposed federal budget cuts to potential savings by lowering healthcare costs, in the process showing how little effect the cuts would have. Together with an updated Health Care Budget Deficit Calculator developed by the CEPR, the data make it clear--according to the CEPR--that any meaningful talk of long-term budget deficits has to center on the healthcare cost crisis. If the crisis is addressed, the US does not have a deficit problem; if it does not address the health care cost crisis, there is no plausible way to address the problem of the deficit.

“The US health care system is possibly the most inefficient in the world: We spend twice as much per person on health care as other advanced countries, but we have worse health outcomes, including a lower life expectancy,” stated the CEPR. “The government, through programs like Medicare and Medicaid, pays for approximately half of the country's health care, almost all of which is actually provided by the private sector. Thus, the bulk of our projected rising budget deficits are due to skyrocketing private health care costs.”

The Patient Protection and Affordable Care Act (PPACA), informally referred to as Obamacare, was signed into law on March 23, 2010. PPACA requires individuals not covered by employer- or government-sponsored insurance plans to maintain minimal essential health insurance coverage or pay a penalty, unless exempted for religious beliefs or financial hardship. The Act also reforms certain aspects of the private health insurance industry and public health insurance programs, increases insurance coverage of preexisting conditions, expands access to insurance to 30 million Americans, and increases projected national medical spending while lowering projected Medicare spending.

Related Links:
Center for Economic and Policy Research
CEPR Health Care Budget Deficit Calculator