OMB's Orszag and GM boss Wagoner warn on health care costs

Two top executives – one from business and one from government – each spoke Tuesday about the urgent need to contain health care costs.

General Motors Chairman Rick Wagoner told a Monitor-sponsored breakfast for reporters that “the impact on us of health care inflation has been absolutely crushing.” Wagoner added that soaring health care costs were, “the biggest single competitive factor that we have been dealing with for at least the last 15 if not 20 years.”

Wagoner spent much of the session talking about GM’s efforts to complete a plan by March 31 to show the government how the company can become viable, a demonstration required for the automaker to qualify for additional federal loans. Wagoner warned that if the company were forced into bankruptcy, it would end up scaring off customers and being liquidated.

Health costs and the nation's fiscal future

Wagoner's concerns about health care costs were echoed by Office of Management and Budget Director Peter Orszag. “Health care, the rate at which those costs grow, is by far the most important thing determining our fiscal future," Orszag said at a Tuesday lunch for reporters hosted by the Monitor.

Medicare and Medicaid currently account for five percent of Gross Domestic Product (GDP), Orszag said. “If health care costs go up at the same rate over the next four decades as they did over the previous four decades, those two programs go from 5 percent of GDP to 20 percent of GDP by 2050,” he said.

An 'unsustainable' path

Talking to reporters with two large white binders with briefing materials in front of him, Orszag said, “we are on a path that is unsustainable,” in terms of health care costs.

Tuesday morning President Barack Obama told a gathering in the Eisenhower Executive Office Building across from the White House that “We are going to get some numbers with respect to the budget that may make this even tougher in the coming couple of weeks.”

Orszag explained the President’s warning by noting that the Congressional Budget Office (CBO) will soon release a re-estimate of the government’s budget situation.  After accounting for the economy’s weak performance in the final three months of 2008, the CBO’s budget deficit numbers “will be more negative than anticipated without that information,” Orszag said.

Along the way, Orszag took a humorous swipe at former Vice President Richard Cheney. No cabinet officer protested his decisions preparing the Obama administration's first budget, a fact that made him “quite proud” Orszag said.

“Someone told me that had never happened before. No appeals to the president from a cabinet officer. And then I was told that during the previous administration there were also no appeals to the president. But that was because cabinet officers went to the vice president and the vice president said you will not be seeing the president,” he said.

Cable critics' 'chatter'

Mr. Orszag downplayed criticism of the administration’s new budget.  “The chatter that fills the cable news networks, I don’t know is intended to be constructive,” he said.