With Halloween right around the corner, this is the season for scary things. One of the scariest things I’ve see recently appeared on the pages of the Wall Street Journal. It had to do with the ability of Congress to predict the cost of health care entitlement programs.
In an opinion piece entitled Health Costs and History, the WSJ examined the record of Congressional forecasters in predicting costs starting with Medicaid, the joint state-federal program for the poor. According to the WSJ, the House Ways and Means Committee had estimated that first-year costs for this program would be $238 million. Instead it hit more than $1 billion, and costs have kept climbing.
In fact, the article says, Medicaid now costs 37 times more than it did when it was launched—after adjusting for inflation. Its current cost is $251 billion, up 24.7% or $50 billion in fiscal 2009 alone, and that’s before the health-care bill covers millions of new beneficiaries.
The article goes on to examine Medicare and found that it has a similar record. In 1965, Congressional budgeters said that it would cost $12 billion in 1990. Its actual cost that year was $90 billion. Whoops. The hospitalization program alone was supposed to cost $9 billion but wound up costing $67 billion. The article points out that these aren’t small forecasting errors. The rate of increase in Medicare spending has outpaced overall inflation in nearly every year (up 9.8% in 2009), so a program that began at $4 billion now costs $428 billion.
Now we are being told a new health-care entitlement will actually reduce red ink by $81 billion over 10 years. Does anyone actually believe that? If they do, that is really scary.
Chart by The Wall Street Journal.