Were it not for the provision that Pat Toomey, the Pennsylvania Republican, put into the Senate’s proposed health care reform, this legislation would be moderately important but hardly momentous. Toomey’s provision, however, makes it this century’s most significant domestic policy reform.
It required tenacity by Toomey to insert into the bill a gradually arriving, but meaningful, cap on the rate of growth of per-beneficiary Medicaid spending. It is requiring of Toomey and kindred spirits strenuous efforts to keep it there, which reveals the Republican Party’s itch to slouch away from its uncomfortable but indispensable role as custodian of realism about arithmetic.
Toomey notes that in every decade since Medicaid began in 1965, it has grown faster than the economy, and than almost every other program, none of which matched Medicaid as a driver of the deficit. In Medicaid’s life, its expenditures have grown more than twice as fast as nominal (unadjusted for inflation) GDP. And although the federal government pays for most of Medicaid, states pay some, and since 1990 the portion of states’ budgets devoted to it has risen from 9.5 to 19.7 percent – almost one in five dollars.
Lawrence Lindsey, formerly a governor of the Federal Reserve System and an assistant to both presidents Bush, puts the matter plainly: “No large component of the federal budget can perpetually grow faster than nominal GDP.” In 1970, Medicaid spending was 1.4 percent of federal spending. In 1980, it was 2.4 percent. In 1990, 3.3 percent. By 2000, it had doubled to 6.6 percent. In 2010, it was 7.9 percent. In 2017, it will be 9.8 percent.
Today, Medicaid, an open-ended entitlement, is one reason approximately 50 percent of America’s $3.4 trillion annual health care bill is generated by 5 percent of the population: These “platinum patients”…