Congressional Budget Office

The Long-Term Costs of Major Health Care Programs: Fiscal Implications and Projection Methods

Presentation to the Joint Network on theFiscal Sustainability of Health Systems,

Organisation for Economic Co-operation and Development,Paris, France

February 16, 2015

Jessica Banthin, Ph.D.Deputy Assistant Director, HealthCongressional Budget Office

1C O N G R E S S I O N A L B U D G E T O F F I C E

Who Makes Federal Budget Projections in the United States?

■ Executive branch

■ Legislative branch

2C O N G R E S S I O N A L B U D G E T O F F I C E

What Projections Does the Congressional Budget Office Make?

■ 10-year baseline budget projections—three times per year

■ Long-term budget projections—once a year

3C O N G R E S S I O N A L B U D G E T O F F I C E

What Is the Purpose of CBO’s Budget Projections?

■ Illustrate implications of generally following current law

■ Serve as a benchmark for measuring proposed changes

4C O N G R E S S I O N A L B U D G E T O F F I C E

Federal Debt Held by the Public

5C O N G R E S S I O N A L B U D G E T O F F I C E

Debt Held by the Public, Total Spending, and Total Revenues

6C O N G R E S S I O N A L B U D G E T O F F I C E

Components of Total Revenues

7C O N G R E S S I O N A L B U D G E T O F F I C E

Components of Total Spending

8C O N G R E S S I O N A L B U D G E T O F F I C E

Federal Spending on Major Health Care Programs, by Category

1999 2004 2009 2014 2019 2024 2029 2034 20390

1

2

3

4

5

6

7

8

Medicare

Medicaid, Children'sHealth Insurance

Program, and Exchange Subsidies

Percentage of Gross Domestic Product

Actual Extended Baseline Projection

9C O N G R E S S I O N A L B U D G E T O F F I C E

How is Health Care Spending Projected?

■ Next 10 years: detailed analysis of programs

■ Later years: fairly mechanical estimates– Number of people who will receive benefits

– Growth in spending per beneficiary

10C O N G R E S S I O N A L B U D G E T O F F I C E

Changes in Population, by Age Group

11C O N G R E S S I O N A L B U D G E T O F F I C E

Causes of Projected Growth in Federal Spending for Social Security and Major Health Care Programs

12C O N G R E S S I O N A L B U D G E T O F F I C E

Possible Approaches to Reducing Federal Health Care Spending

■ Improve the health of the population

■ Reduce federal subsidies for health insurance

■ Reduce tax preferences for employment-based health insurance

■ Pay Medicare providers in different ways

■ Make larger structural changes to federal health care programs

■ Undertake other possible reforms