Transcript Slide 1

Health Care Cost Growth: An Unsustainable Prognosis
presented by
Robert L. Bixby, Executive Director
THE CONCORD COALITION
www.concordcoalition.org
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THE CONCORD
COALITION
Washington Needs a Fiscal Wake-Up Call From
“We The People”
www.concordcoalition.org
•
The Fiscal Wake-Up Tour consists of
speakers from diverse perspectives
who are increasingly alarmed by the
nation’s long-term fiscal outlook.
•
Our mission is to cut through the
usual partisan rhetoric and stimulate
a more realistic public dialogue on
what we want our nation’s future to
look like, along with the required
trade-offs.
•
Elected leaders in Washington know
there is a problem, but they are
unlikely to act unless their
constituents — We The People —
demand it.
THE CONCORD
COALITION
Composition of Projected FY 2009 Federal Government
Revenues and Outlays
(Deficit: $1.59 Trillion)
Interest
In Billions of Dollars
Domestic*
Estate & Gift Taxes
($21 billion)
Defense
Other Taxes
Other
Entitlements
Corporate Taxes
Financial
Rescue**
Social
Insurance
Taxes
Medicare
& Medicaid
Individual
Income
Taxes
Social
Security
Outlays: $3.69 trillion
Revenue: $2.1 trillion
*Includes all appropriated domestic spending such as education, transportation, homeland security, housing
assistance, and foreign aid.
**CBO classification of funds allocated for TARP, Fannie Mae, and Freddie Mac. Source: CBO August 2009.
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COALITION
Federal Spending vs. Revenues as a
Percent of GDP (FY 1980-2009)
CBO March Baseline Compared to CBO Estimate of the President’s Budget
Percentage of GDP
Actual
Projected
Average outlays: 21.0%
Average revenues: 18.3%
CBO August 2009 Baseline
Source: Congressional Budget Office, August 2009.
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CBO’s Estimate of the President’s Budget
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Percent of Debt Held by the Public
Owned by Foreigners
(1987-2008)
Source: United States Treasury Department, Treasury Bulletin, December 2008.
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COALITION
National Saving Is Very Low by Historical
Standards
Source: BEA, NIPA Tables 1.1.5 and 5.1 (2009).
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COALITION
Billions of Dollars
Interest Costs Go Through The Roof
Source: Congressional Budget Office, June 2009.
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COALITION
Mandatory spending is consuming a
growing share of the budget
1968
1988
2008
28%
44%
66%
42%
38%
53%
6%
14%
Mandatory
Net Interest
9%
Discretionary
Source: Congressional Budget Office, January 2009.
NOTE: Numbers may not add up due to rounding.
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Outlays of Select Mandatory Spending Programs
(FY 2009 Projected)
Source: Congressional Budget Office, January 2009.
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COALITION
Social Security, Medicare, & Medicaid as a
Percentage of the Federal Budget
All other Federal
Spending
Social Security,
Medicare and Medicaid
$1.91 Trillion
$1.35 Trillion
59%
41%
CBO treatment of TARP, Fannie
Mae and Freddie Mac: $424 billion
Source: Congressional Budget Office, August 2009.
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COALITION
America’s Population is Aging
Percentage of Population Aged 65 and Over
Population age 65 and Over
Year
Source: Social Security and Medicare Trustees’ Report, May 2009.
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COALITION
Health Expenditures as a Percent of GDP
(1960-2018)
*Projected
Source: Centers for Medicare and Medicaid Services.
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THE CONCORD
COALITION
Health Care Costs are Rising Faster
Than the Economy
Percentage of GDP
Historic Level of
Federal Spending
Historic Level of
Federal Revenues
Assumes that health care cost growth will not exceed GDP growth.
Assumes that health care cost growth continues at the average rate for the past 40 years (2.5
percentage points greater than GDP growth.)
Assumes that health care cost growth rate declines to 1.0 percentage point greater than GDP growth—
consistent with the assumption used by the Medicare Trustees.
Source: Congressional Budget Office, June 2009.
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COALITION
Factors Explaining Future Federal Spending on Medicare,
Medicaid, and Social Security
Percent of Growth Attributed to:
2035
2080
Excess Cost Growth
36%
56%
Aging
64%
44%
Source: Congressional Budget Office, June 2009.
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COALITION
How Paying for Health Care Has Changed
(1960-2008)
Source: Centers for Medicare and Medicaid Services.
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THE CONCORD
COALITION
Sources of Medicare Funding
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COALITION
16
Medicare Costs Soar in the Coming Decades
Calendar Year
General Revenues required to fund the program
Income from dedicated taxes, premiums, and state transfers
Source: Medicare Trustees’ Report, May 2009.
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THE CONCORD
COALITION
Percent of Taxable Payroll
Benefits promised far exceed dedicated
tax revenues
Social Security
Cash Deficits
Payroll Tax & Taxation of Benefits
Calendar Year
Source: Social Security Trustees’ Report—May 2009 (Intermediate Projections).
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COALITION
Social Security and Medicare Part A Cumulative Cash
Surpluses and Deficits
In Constant 2009 Dollars — 2009 through 2085
In Billions of Constant 2009 Dollars
$147 Billion: Cumulative
Social Security Cash Surplus
-$28 Trillion: Cumulative
Social Security Cash Deficits
-$58 Trillion: Cumulative
Medicare Part A Cash Deficits
-86 Trillion: Cumulative Social Security
and Medicare Part A Cash Deficits
2010
2020
2030
2040
2050
2060
2070
2080
Calendar Year
Source: Social Security Trustees’ Report—May 2009 (Intermediate Projections)
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Percentage of Revenues
Social Security, Medicare, Medicaid and Interest
Consume All Federal Revenues in under 20 Years
Year
Social Security, Medicare and Medicaid
Source: Government Accountability Office, March 2009.
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Interest
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Current fiscal policy is on an unsustainable path
Federal Outlays as a Percentage of GDP
Interest
All Other
Medicaid
Average tax revenue
Medicare
Social Security
Source: Government Accountability Office, March 2009.
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THE CONCORD
COALITION
Cost Control Strategies
1.
2.
3.
4.
5.
Budgetary restraint. Unlike many other nations, we do not budget for health care. Yet all of our nation’s commitments
need to be evaluated and prioritized. That’s impossible without long-term budgeting for one of the largest spending
categories. A health care budget would force politicians, providers and the public to do the necessary prioritizing for
responsible health care spending.
Perverse payment incentives. Fee-for-service payment reimbursing providers for each individual service raises
costs in two ways. It rewards providers who do more, regardless of whether that contributes to better health. And it
encourages fragmented care rather than a coordinated approach in which providers are jointly accountable for a patient’s
health. That, combined with third-party insurance coverage and open-ended budgets for public programs such as
Medicare, means no one has an incentive to minimize costs.
Evidence-based practices. Extraordinary variation exists across the country in health care costs, with no difference in
the quality of care. This results, in part, from lack of knowledge about the effectiveness of treatments and from
insufficient evidence-based practice guidelines. It leads to widespread use of ineffective treatments while effective
treatments are under-utilized. Ultimately, we need to decide which treatments are worth paying for and which are not.
Tax incentives. Tax preferences for health insurance allow employers to provide unlimited benefits tax-free. This
creates another perverse incentive that encourages higher health care spending. It is also regressive and unfair to those
attempting to purchase their own insurance.
Enforcement mechanism. There will be an ongoing need to ensure that assumed savings are realized, guard against
unintended consequences and provide a means to implement future “curve bending” reforms. A permanent review
mechanism is needed to make recommendations that must be considered by Congress.
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COALITION
Key Points of Agreement
Members of the Fiscal Wake-Up Tour do not necessarily agree on the ideal
levels of spending, taxes and debt, but we do agree on the following key points:
• Current fiscal policy is unsustainable
• There are no easy solutions, such as cutting waste fraud
and abuse or growing our way out of the problem.
• Finding solutions will require bipartisan cooperation and
a willingness to discuss all options.
• Public engagement and understanding is vital in finding
solutions.
• This is not about numbers. It is a moral issue.
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THE CONCORD
COALITION