Columns » Ernest Dumas

What’s a trillion?



If a number can trump a national consensus, a trillion seems to be the magic figure. When the Congressional Budget Office scored one of the two Senate health insurance plans at a budget cost of $1 trillion over 10 years and the other at $1.6 trillion and both plans left out a few million of the uninsured, opponents said it was time to close the shop.

If it's going to add a trillion to two trillion dollars over a decade in either debt or taxes, the Republicans and a few querulous Democrats said last week, we had better wait a few years or else do something small and piecemeal.

But trillions may not panic people the way the word once did. They have seen it a lot in the past decade when it was the Republicans who were running up the numbers. President Bush's tax cuts are adding nearly $2 trillion to the national debt over the decade and all we got from them was a shipwrecked economy. You may remember when President Bush said in 2004 that his Medicare prescription drug program would only add $500 billion to the national debt over its first 10 years. Wait, the White House budget office said two years later when the program got started, make that only $1.2 trillion.

The difference is that President Obama insists on paying for universal health coverage up front, through taxes and savings in current health outlays, and the House and Senate committees are all intent on paying the bill. A New York Times-CBS News poll last week showed that a vast majority of Americans wanted the health-care system overhauled so that every person was insured and costs were reined in, and most accepted the idea that there would need to be new taxes to do it. A stunning 72 per cent, including half of Republicans, thought there should be a Medicare-like public insurance option that competed with private insurers and kept costs down.

So why should a 10-year projection of $1.6 trillion — $160 billion a year — be a deal-breaker as the opponents were saying? It's not so hard to get there.

Even John McCain had a tax remedy. His health-care plan during the presidential campaign included repeal of the exclusion of employer-provided health benefits from a person's taxable income for income and payroll tax purposes, which would produce perhaps $180 billion a year. That is $1.8 trillion or so over 10 years. Sharply restricting the tax break was first recommended by a task force of President Bush. Half of this government subsidy goes to people earning more than $75,000 a year and a fourth to those earning more than $100,000 a year. The tax break is particularly regressive — the higher your income the greater the government subsidy.

Repealing it would be a hard pill for Democrats to swallow — unions oppose it and there is legitimate worry that it might cause many employers to end coverage altogether — but limiting the exclusion to the $13,000 value of the standard federal employee health plan would produce some fairness and still raise $400 billion. That would go a long way toward expanding Medicaid to families earning less than twice the federal poverty line ($19,300 for a family of four). That is about two-thirds of the 46 million uninsured.

President Obama ecstatically announced a “historic agreement” with the pharmaceutical industry to slash the cost of prescription drugs for Medicare beneficiaries who find themselves in the “doughnut hole” — those whose subsidized purchases reach $2,700 in a year. While that is good news for millions of the elderly poor who may now be able to continue the drugs during the closing months of a year it won't save the government much. The pharmaceuticals were worried that they might be required to do much more.

The Center for Budget and Policy Priorities recommends a number of steps to cut tens of billions a year from Medicare and Medicaid outlays that Congress ought to include in the health plan. Drug makers under federal law must pay rebates to the federal and state governments for drugs that Medicaid dispenses, which ensures that Medicaid pays no more than private purchasers. The minimum rebates have not changed in 15 years and ought to be increased, which would save tens of billions of dollars over 10 years.

If Congress required drug companies to provide the same rebates for drugs to dual eligibles (Medicaid and Medicare) under the Medicare drug program as Medicaid requires the government would reap a savings of $86 billion over 10 years.

Those are just for starters. There ought to be nothing daunting about a trillion dollars, or two, over 10 years when it is simply a reshuffling of the $2.5 trillion that the nation already spends yearly with so few results.


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