Assessing Effects on the Federal Budget of Policies to Promote Health and Prevent Disease
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Assessing Effects on the Federal Budget of Policies to Promote Health and Prevent Disease

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Assistant Director for Health, Retirement, and Long-Term Analysis Linda Bilheimer's presentation to the Centers for Disease Control and Prevention

Assistant Director for Health, Retirement, and Long-Term Analysis Linda Bilheimer's presentation to the Centers for Disease Control and Prevention

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Assessing Effects on the Federal Budget of Policies to Promote Health and Prevent Disease Assessing Effects on the Federal Budget of Policies to Promote Health and Prevent Disease Presentation Transcript

  • Congressional Budget Office September 11, 2012 Assessing Effects on the Federal Budget ofPolicies to Promote Health and Prevent Disease Presentation to the Centers for Disease Control and Prevention Linda Bilheimer Assistant Director for Health, Retirement, and Long-Term Analysis
  • Assessing the Cost Impact of Health Interventions:Key Concepts ■ Costs of Health Care – Annual health care spending per capita – Lifetime health care spending per capita ■ Cost-Effectiveness – Return on investment ■ Budgetary Impact CBO’s Focus – Federal government’s spending and revenues CONGRESSIONAL BUDGET OFFICE
  • Considerations in Estimating the Budgetary Impact of aProposed Health Policy ■ Baselines for Health Care Spending, Health Risks, and Health Outcomes ■ Behavioral Responses to the Policy ■ Effects of Behavioral Change on Population Health ■ Effects of Population Health Changes on Federal Spending – Medicare, Medicaid, Social Security (OASI and DI), Supplemental Security Income, subsidies via exchanges, other federal programs ■ Direct and Indirect (Health-related) Revenue Effects ■ Strength of the Evidence Base CONGRESSIONAL BUDGET OFFICE
  • Types of Health Promotion and Disease PreventionInterventions ■ Clinical Preventive Services ■ Community-Based Health Promotion ■ Laws and Regulations to Limit Risky Behavior ■ Personal Financial Incentives to Modify Risky Behavior ■ Excise Taxes on Products with Health Risks CONGRESSIONAL BUDGET OFFICE
  • Analyzing Prevention Policy Effects: The Interdisciplinary Challenge CONGRESSIONAL BUDGET OFFICE
  • Prepolicy: Epidemiology Questions ■ What risk factor (or condition) does the policy target? ■ How prevalent is the risk factor? – Variation among population subgroups ■ What are the effects of the risk factor on health and mortality? – Confounding risks ■ What are the prevalence projections for 10, 25, 50 years for the risk factor and its health consequences? – State and local government policies – Employers’ behavior – Health care system developments – Socioeconomic factors – Community norms CONGRESSIONAL BUDGET OFFICE
  • Baseline Projection: Prevalence of Smoking Through 2035 (Percentage of U.S. adults) 30 Actual Projected 25 20 15 10 5 0 1992 1999 2005 2011 2017 2023 2029 2035 Based on data from multiple years of the National Health Interview Survey. CONGRESSIONAL BUDGET OFFICE
  • Smoking and Mortality: Probability of Dying in the Next Year (Percent) 8 7 Current or Former Smokers 6 People Who Have Never Smoked People Who Have Never Smoked but 5 Have the Other Characteristics of Smokers 4 3 2 1 0 18–24 25–44 45–64 65–74 75 or Older Based on data for 1997 to 2004 from the National Health Interview Survey combined with death certificate records. CONGRESSIONAL BUDGET OFFICE
  • Prepolicy: Questions Linking Epidemiologic,Economic, and Fiscal Outcomes ■ How do the health outcomes associated with the targeted risk factor (condition) affect: – Annual and lifetime per capita health care spending? • Overall and among population subgroups? – Health insurance premiums? • Taxed and untaxed shares of compensation? – Labor force participation? – Productivity in the workplace? – Participation and spending in government health, disability, and retirement programs? ■ What are the projections of those metrics for 10, 25, 50 years? CONGRESSIONAL BUDGET OFFICE
  • Smoking and per Capita Health Care Spending(2008 dollars) 12,000 Current or Former Smokers 10,000 People Who Have Never Smoked 8,000 People Who Have Never Smoked but Have the Other Characteristics of Smokers 6,000 4,000 2,000 0 18–24 25–44 45–64 65–74 75 or OlderBased on data for 2000 to 2008 from the Medical Expenditure Panel Survey and for 1998 to 2007 from the National Health Interview Survey. CONGRESSIONAL BUDGET OFFICE
  • Smoking and Labor Force Outcomes: Comparisons withNonsmokers with Similar Characteristics(Percent) Current Smokers Former Smokers 6 4 2 0 -2 -4 Likelihood of Being Retired Likelihood of Being Employed -6 Among the Nonretired -8 Weekly Hours Among Workers Hourly Wages Among Workers- 10 Earnings- 12Based on data for 2006 and 2007 from the Census Bureau’s Current Population Survey. CONGRESSIONAL BUDGET OFFICE
  • Postpolicy: Behavioral Responses and Health Outcomes ■ What responses would the policy induce from: – Individuals? • Variation among population subgroups? – State and local governments? – Employers? – Health care system? ■ How would those behavioral responses affect health and longevity: – Initially? – Over time? ■ What behavioral substitutions might occur? ■ How sustainable would the responses and effects be? CONGRESSIONAL BUDGET OFFICE
  • Postpolicy: Economic Outcomes ■ How would the health and longevity outcomes affect: – Annual and lifetime per capita health care spending? • Variation among population subgroups? – Health insurance premiums? • Taxed versus untaxed compensation? – Labor force participation? – Productivity in the workplace? CONGRESSIONAL BUDGET OFFICE
  • Postpolicy: Fiscal Outcomes ■ How would health, longevity, and associated economic outcomes affect: – Participation and spending in federal programs? • Medicare • Medicaid and exchange subsidies • Social security (OASI and DI) • Other federal health and retirement programs – Federal revenues? • Changes in earnings • Changes in the mix of compensation CONGRESSIONAL BUDGET OFFICE
  • Goal of CBO’s Smoking Project ■ Assess the Full Budgetary Consequences of an Increase in the Federal Excise Tax on Cigarettes – Consider a 50-cent increase (Indexed for inflation and growth in income) – Focus primarily on changes in federal outlays and revenues resulting from changes in health because of the policy – Estimate effects for the 10-year “budget window” and the longer term ■ Caveats – Policymakers’ decisions depend on other considerations besides the budget – Other policies to improve health would probably have different budgetary effects – Strength of evidence was a factor in selecting this case study of a prevention policy CONGRESSIONAL BUDGET OFFICE
  • CBO’s General Analytic Approach CONGRESSIONAL BUDGET OFFICE
  • Health Response Lag for Smokers Who Quit: Rate of ImprovementToward Health Status of Nonsmokers with Similar Characteristics(Percent) 100 90 80 70 60 50 40 30 20 10 0 0 6 12 18 24 30 36 42 48 54 60 66 72 Years After Smoking CessationBased on data in a report from 2007 by the International Agency for Research on Cancer and reports from 1990 and 2004 by the Surgeon General. CONGRESSIONAL BUDGET OFFICE
  • Increase in the Population Because of the Policy(Number of additional people)70,00060,00050,000 All Adults40,00030,000 65 or Older20,000 18 to 64 Years Old10,000 0 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 CONGRESSIONAL BUDGET OFFICE
  • Average Changes in Health Care Spending and Earnings forAdults Affected by the Policy (Percent) Change in Annual per Capita Spending on Health Care 0 -2 -4 -6 -8 - 10 - 12 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 Change in Earnings 4 3 2 1 0 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 CONGRESSIONAL BUDGET OFFICE
  • Effects on Federal Outlays of Increased Longevity andLower per Capita Health Care Spending (Percentage of GDP) 0.025 0.020 Effects of Increased Longevity 0.015 0.010 Total Effects on Outlays 0.005 0 - 0.005 - 0.010 Effects of Lower per Capita Health Care Spending - 0.015 2013 2019 2025 2031 2037 2043 2049 2055 2061 2067 2073 2079 2085 CONGRESSIONAL BUDGET OFFICE
  • Effects on Federal Outlays, by Program (Percentage of GDP) 0.0025 0.0020 Total 0.0015 0.0010 Social Security Medicare 0.0005 Other 0 Medicaid and - 0.0005 Subsidies Through Health Insurance Exchanges - 0.0010 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 CONGRESSIONAL BUDGET OFFICE
  • Health-Related Effects on Federal Revenues (Percentage of GDP) 0.012 0.010 Total Effects on Revenues from Improvements in Health 0.008 0.006 Effects of Changes in Labor Earnings per Capita 0.004 Effects of Increased Longevity 0.002 0 Effects of Lower Health Insurance Premiums and Related Factors - 0.002 2013 2019 2025 2031 2037 2043 2049 2055 2061 2067 2073 2079 2085 CONGRESSIONAL BUDGET OFFICE
  • Health-Related Effects on Revenues, Outlays, and the Deficit (Percentage of GDP) 0.014 Total Effects on Outlays 0.012 Total Effects on Revenues from 0.010 Improvements in Health 0.008 0.006 0.004 0.002 0 - 0.002 Net Effects on the Deficit from - 0.004 Improvements in Health - 0.006 2013 2019 2025 2031 2037 2043 2049 2055 2061 2067 2073 2079 2085 CONGRESSIONAL BUDGET OFFICE
  • Overall Budgetary Effects of the Policy (Percentage of GDP) 0.03 Total Effects on Revenues 0.02 0.01 Total Effects on Outlays 0 - 0.01 - 0.02 Net Effects on the Deficit - 0.03 2013 2019 2025 2031 2037 2043 2049 2055 2061 2067 2073 2079 2085 CONGRESSIONAL BUDGET OFFICE
  • Main Conclusions of the Smoking Study ■ Changes in federal spending from improved health would be relatively small. ■ Federal spending would be lower in the first decade but begin rising in the second or third decade. ■ Better health would raise revenues on an ongoing basis ■ Combined, those health effects would produce very small declines in the deficit for about five decades ■ The largest budgetary effects would come from excise tax receipts, dominating health effects for at least 75 yearsFor further information, see Congressional Budget Office, Raising the Excise Tax on Cigarettes:Effects on Health and the Federal Budget (June 2012), www.cbo.gov/publication/43319 CONGRESSIONAL BUDGET OFFICE
  • Implications for Future Analyses • Analyzing the budgetary effects of prevention policies requires analysis at the intersection of epidemiology, economics, and fiscal analysis. • Despite a broad body of information on smoking, multiple data gaps exist, resulting in considerable challenges for estimating effects of smoking cessation policies. • For other potential prevention policies, data and research evidence are less extensive, making budgetary estimates even more difficult and speculative. CONGRESSIONAL BUDGET OFFICE
  • Acknowledgments • Many CBO analysts, past and present, contributed to the smoking study. • Major contributors include: – Jim Baumgardner – Mark Booth – Will Carrington – Noelia Duchovny – Ellen Werble CONGRESSIONAL BUDGET OFFICE