Obama’s Healthcare Conference and the Problem of Demographics

The President’s June 23^rd press conference on health care reform aimed to address the plans of the administration and quell concerns over the substantial legislative changes.  The President intended to make clear that his legislative plans would not add to our deficits, and that any intervention of the government in healthcare insurance would prove beneficial to the customer.  He went on to state that the administration plans to ensure these goals through savings and efficiencies within the system as well as incentive changes to slow the growth of long-term private health care spending.  Additionally, the President promised that people who were happy with their current plans and doctors would be able to remain in their same position, while those who couldn’t afford insurance or were paying too much would have more options through government intervention and marketplace competition. 

While these changes, if enacted, could certainly have a positive effect on the health care system, Keith Hennessey, former economic advisor to President Bush, argues that some of the goals made by Obama are not as straightforward as they seem, and may, in fact, be missing the bigger issue.  Hennessey makes the case that though the President’s refusal to add to the deficit and promise to keep satisfied customers happy while extending healthcare coverage are crucial plans, the statements made by Obama are not backed up within the current legislative policies laid out in either the House or Kennedy-Dodd draft.

He explains that while current proposals, like the pharmaceutical industry announcement to lower Medicare prescription costs by $80 million in ten years, will help cut spending for parts of the general population, such plans will have little tie to the current deficit.   Additionally, according to the CBO, the Kennedy-Dodd bill is projected to cause ten million people to lose their employer based service, meaning that even if someone was happy with their health insurance, there would be no promise that their company would continue to offer it after changed government plans were enabled.  These and other specific insights lead Hennessey to question which of the President’s goals can be met and which need further considerations and legislation to be made possible.

Even if such goals were accomplished, Hennessey feels that current health care reform plans are missing the bigger issue of changing demographics within the population.  While the President and budget director frequently cite the need to “bend the health care curve downward” in order to curb government spending, this is not the only consideration in addressing long-term fiscal problems. 

In 1950 there were 16 workers paying for every retiree, however, based on future estimates, there will soon be only two workers paying for every retiree, causing per capita spending to go through the roof.  Hennessey suggests that while this is a problem that needs to be addressed, it is not the primary driver of budget problems.  The population as a whole is aging rapidly as a result of the baby boom and living longer due to advancements in medicine, meaning that they are collecting Medicare benefits for longer periods of time.  While this is inherently a good thing, he argues that the aging of the population is, in fact, the biggest issue in budget considerations, and both changes in demographics and per capita spending must be addressed to prevent fiscal meltdown.

To read the full Keith Hennessey Blog entries go to http://keithhennessey.com/category/health/