George Mason U.Study: Obama healthcare could worsen U.S. debt by $530 billion

A new report from Citigroup on the U.S. healthcare system makes the case that Obamacare isn’t going to work. The report reads like it was written by Paul Ryan. Instead of curbing government spending, President Barack Obama's healthcare law could add up to $530 billion to the federal debt over ten years, a Republican expert on U.S. government benefit programs said on Tuesday. A study by Charles Blahous, a George Mason University research fellow and the Republican trustee for the Medicare and Social Security entitlement programs for the elderly, challenged the administration's contention that the 2010 law would reduce healthcare costs. Among the points made are the following:

1) The 3d-party payments system are at the root of the subversion in market forces. There is no healthcare market ruled by supply and demand.
    - U.S. healthcare outlays have grown 2 ½ percentage points faster than U.S. income over the past three 
      decades
    - Healthcare price inflation exceeded overall consumer price inflation by 2 percentage points in the same
      period
    - Per-capita U.S. healthcare expenditures are nearly twice the average of other OECD members.
    - There is a significant lack of economic incentives in either private or public insurance schemes
    - With no incentives, patients are unlikely to consider impacts of their spending on the public purse or
       program costs for private insurance        
    - Spending decisions are largely left to Health providers who themselve derive income with each
       procedure or pharmaceutical sold

       Upshot: In arguments for or against a market-determined healthcare system, U.S. policymakers
       shouldn’t pretend that one now exists in the US.

2) When markets forces are allowed to function in healthcare, they work their usual magic:
    - In areas where expenditures are uninsured, and patients consider the economic ramifications for their
       treatments, market competition has reduced price pressures notably.
    - When market forces are allowed to function, it is unknown to have shortages of supplies or rapid price
       increases products like off-prescription drugs, elective surgeries, and tests.

3) U.S. healthcare system is NOT an example of a market failure.
    - “With government transfers covering nearly half of healthcare outlays and private transfer schemes
        covering all but 12% of the consumer healthcare budget, it seems ironic that high healthcare costs in the 
        U.S. are deemed a ‘market failure’ when functioning market price competition barely exists.”

4) Having a part private, part public healthcare systemis a bad mix.
    - ”The healthcare system in the U.S. reminds us somewhat ominously of the bubble in housing finance, a
       “public/private partnership.” Housing consumption still receives strong tax preferences, as does health     
        to quasi-nationalization, housing GSEs earned private profits from public subsidies for housing, as do
        U.S. healthcare providers.”

5) A market-based, consumer-driven healthcare system might be best, although hard to implement now.
    - Counting private health insurance and other transfer schemes, only 12.0% of health care outlays are now
       directly paid for by consumers (according to the Centers for Medicare and Medicaid Services).
    - It projects this amount will fall to just 9.4% by the end of the decade.
    - Reversing these shares is simply politically unlikely.”

6) Of course, Obamacare increases government subsidies for healthcare
    - Directly or by expanding Medicaid.
    - Obamacare doesn’t fix the Medicare fee-for-service issue.
    - Overall, Obamacare makes the third-party payment system worse. 
    - Obamacare makes it harder for markets to operate. 
    - At the same time, it doesn’t strictly ration care like some foreign healthcare systems. At least not yet

7) The Citigroup study suggests we are headed:
    - “Government programs should be governed, and program participants must live with limits, controls and
        intervention that come with government budgets.”