Transcript Triangle of Painful Choices

Triangle of Painful Choices
National Institute for Health Care
Management
April 2, 2013
http://nihcm.org/administrator/components/com_civicrm/civicrm/extern/url.php?u=11529&qid=591362
Achieving longer-term fiscal solvency requires hard decisions on revenue and spending.
Triangle of Painful Choices
• The magnitude of the changes necessary to
balance the budget is illustrated in an Altarum
model known as the Triangle of Painful Choices.
• The model sets the goal of balancing the budget
by 2035 and assumes that spending on Social
Security and interest remain fixed at the 2012
levels as a percentage of GDP. (Of course, with
an aging population and interest rates at historic
lows, these assumptions may be optimistic.)
TPC-2
• In this model, if we can hold health spending growth to
the same pace as potential GDP and if tax revenue
amounts to 19 percent of GDP, then we can balance the
budget only if our spending on defense and all other
non-health activities is 6 percent of GDP (point A). This is
roughly half the 2012 spending level.
• Higher tax revenues would support correspondingly
higher spending for defense and other non-health
activities (points B and C, for example)—as long as
health spending grows at the same rate as the PGDP.
However, our more likely choice set lies to the right of
the ABC line, with more rapid growth in health spending
requiring even deeper spending cuts or higher taxes.