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The Central Question for Health Policy in Deficit Reduction

Henry J. Aaron

The United States is in the midst of a massive, multi-front war on federal government deficits. When Congress raised the debt ceiling, it created a super committee with unprecedented powers to recommend deficit-reducing measures totaling at least $1.2 trillion over the next decade. Virtually nothing, other than the Constitution, limits what the committee may recommend. Furthermore, Congress has obliged itself to vote on whatever the committee recommends — no filibusters allowed, no amendments permitted, and only simple majorities are required for passage. If legislated cuts fall short of the $1.2 trillion target, automatic cuts will be made in most government programs, half in the area of defense and half in domestic and international activities. Numerous official and private commissions have proposed plans for cutting the deficit as well.

President Barack Obama has simultaneously advanced a complex menu of initiatives that would boost spending and  cut taxes in the near term to combat the recession but would lower the deficit of the next decade through a combination of spending cuts and tax increases. Modifications in federal health programs would account for about $300 billion of those cuts — just enough, as it happens, to pay for the added cost of not allowing scheduled cuts in Medicare’s physician fees to take effect. Obama’s proposal to boost taxes is a direct challenge to the often-repeated pledge of the Republican leadership not to accept any revenue increases.

Debates on health care policy are bound to bulk large in the deliberations of the super committee, as they do in Obama’s proposals. Health programs constitute 23% of the federal budget and even more of projected spending growth. If spending is to be cut, they are too large to leave untouched. How they are changed is important. But whether tax increases are part of any program to cut the deficit is vastly more important — not just for the economy but also for health policy.

Read the rest of this article at the New England Journal of Medicine website »

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