Health Funding With Funny Money

(MoneyWatch)  If haven't realized yet the Federal Government budgets in a way nobody else does. There is currently a debate going on with Congress and the White House about reforming the U.S. health care system. A big part of this is how to pay for it all. Within their proposed 2010 budget the Obama Administration has found about $600 billion in "savings" that will be used to start paying for any reforms. Congress is looking at a variety of taxes in order to pay for their bill.

The most often discussed new way to pay would be to eliminate the tax free status of insurance premiums. This was an outgrowth of World War II where the government limited pay to make sure that all of the war manufacturing facilities were properly staffed. To get around these limits businesses began to offer health insurance and other benefits in a bid to lure workers. This proposal is obviously objected to by many, including candidate Obama last year, as a major tax increase on every American. This is because the majority get their health insurance through work.

Because the Congressional Budget Office (CBO) is required to score all legislation for its cost and affect on the total budget there is concern among many Democrats that the total bill will be much higher for their proposed legislation. In a bid to get ahead of that President Obama announced Saturday that his administration had identified another $300 billion in "savings" to help pay for this.

The savings though are not really that at all. Most of the money comes from the idea that hospitals and medical equipment manufacturers will be able to realize efficiencies requiring less money in payment from Medicare and Medicaid. There is no guarantees that these will be realized.

Another $100 billion is a typical accounting ploy by the Federal government. This assumes that with a move to have "universal health care" there will be less uninsured Americans. This means that the Feds won't have to cover so many uninsured people which they do now by rebating money to hospitals who provide the care for free. This assumes that there won't be any influx of uninsured, who often in the U.S. are illegal immigrants. The evidence from Massachusetts who has a mandatory coverage requirement like the U.S. is discussing is that costs are still going up and people are still using emergency rooms for primary care treatment.

Only an entity like the Federal government could base their future financial planning on projected savings from programs that have not even been initiated or proven. It is the same with the idea of defense acquisition reform saving money. To date the only money saved in that area has been by canceling programs so that there will be no future expenditure on them.

This debate is just starting and there will be much more to come about it in the next six months.