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62 IRET Policy Bulletin 1 (1994)

handle is hein.taxfoundation/iretpbul0021 and id is 1 raw text is: March 16,1994 No. 62 THE CLINTONS' HEALTH CARE REFORM PLAN WOULD INCREASE HEALTH CARE COSTS Do We Spend Too Much on Health Care? There are two principal rationales for the Clintons' and similar health care reform plans. One rationale is economics: the conviction that the nation spends too much on health care and that health care uses up too much of our production resources. The second rationale has to do with the federal budget: our allegedly excessive outlays for health care are deemed to be a major source of federal budget deficits (President Clinton's budget proposals in February 1993 repeatedly stressed the idea that projected deficits would be materially reduced if his then yet-to-be-specified health plan were adopted). The budgetary consequences of the existing health care financing system and of the Clintons' proposal have been given a good deal of attention. A number of analyses, most importantly that of the Congressional Budget Office, have concluded that the Clintons' plan would increase the federal budget deficit, notwithstanding the proposed tax increases and reduced spending for Medicare and Medicaid. Much less attention, however, has been given to the equally important question concerning the economic effects of the Clintons' plan, that is, whether it would lead to effectively economizing on the use of resources for health care. 1 The nation's economic and fiscal health, health care reformers tell us, depends on curbing our appetites for better health. Alice M. Rivlin, deputy director of the Office of Management and Budget, expressed this view colorfully: Almost everyone agrees that if we are to have the productive, competitive, flexible economy that we all want, we cannot allow the 'health care tax' to continue rising. We are already using 14% of our gross domestic product to pay for health care. ' See, however, the excellent analyses of the impact of many of the important features of the plan that are provided in the Joint Committee on Taxation Staff Description and Analysis of the Employer Mandate and Related Provisions of the Health Security Act (HR 3600), February 2, 1994. Institute for IRET is a non-profit, tax exempt 501(c)3 economic policy research and educational Research organization devoted to informing the public about policies that will promote on the economic growth and efficient operation of the market economy. Economics of 1730 K Street, N.W., Suite 910 * Washington, D.C. 20006 Taxation (202) 463-1400 * Fax (202) 463-6199 e Internet www.iret.org