Can We Reduce Our Federal Deficit and Create Jobs by Making the Healthy Choice the Easiest Choice? with Michael P. O’Donnell, PhD, MBA, MPH and Mari Ryan, MBA, MHP, CWWPC
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Can We Reduce Our Federal Deficit and Create Jobs by Making the Healthy Choice the Easiest Choice? with Michael P. O’Donnell, PhD, MBA, MPH and Mari Ryan, MBA, MHP, CWWPC
1. Can We Reduce Our Federal
Deficit and Create Jobs by Making
the Healthy Choice the Easiest
Choice?
2. Presenters
Moderator
Mari Ryan, MBA
CEO, Advancing Wellness
Member, Board of Directors, Health Promotion Advocates
Speaker
Michael P. O'Donnell, PhD, MBA, MPH
Editor in Chief and President, American Journal of Health Promotion
Member, Board of Directors, Health Promotion Advocates
3. Format
• CBO Long Term Budget Projections
• Health Related Causes of Federal Spending
– Medical Care, Medicaid, other Health Spending
– Social Security
• Strategy to Improve Health
• Some of the numbers
• Next Steps
This is a work in progress and we need your help refining it!
4. Primary Spending and Revenues, by Category, Under
CBO’s 2011 Long-Term Budget Scenarios
Percentage of GDP
Source: Congressional Budget Office, 2012
5. CBO Spending Projections
Extended baseline: Current laws continue
• Bush era tax cuts, payroll tax cuts, emergency & unemployment benefits will expire
12/2012
• Federal spending in all areas except health care, social security and interest will
decline to historically low levels.
Alternative scenario (deemed more likely given political pressures).
• Bush era tax cuts will be extended.
• Medicare payments to physicians will not decline…aka the “Doc Fix”
• Cost containment provisions in Affordable Care Act stop after 2021. (Note: spending
would be even higher if Affordable Care Act is ruled unconstitutional or repealed)
• Federal spending in areas beyond health care, social security and interest will reach
historically low levels, but not as low.
Financial Cliff: scheduled tax increases + sequestration = recession?
• Barclays Capital estimate these would reduce 2013 annualized 1st quarter growth
rate from 3.0% to 0.2. Bush tax cuts: 1.0%; payroll tax: .8%, unemployment: .2%;
sequestration automatic spending cuts: .8%
6. Primary Spending and Revenues, by Category, Under CBO’s
Long-Term Budget Scenarios Through 2085
Percentage of GDP
Source: Congressional Budget Office, 2012
7. Mandatory Federal Spending on Health Care, by
Category, Under CBO’s Extended-Baseline Scenario
Percentage of GDP
Source: Congressional Budget Office, 2012
8. Spending for Social Security Under CBO’s
Long-Term Budget Scenarios
Percentage of GDP
8
9. Other Federal Spending Under CBO’s
Long-Term Budget Scenarios
Percentage of GDP
Source: Congressional Budget Office, 2012
10. Federal Debt Held by the Public Under CBO’s Long-
Term Budget Scenarios Through 2085
Percentage of GDP
Source: Congressional Budget Office, 2012
11. Causes of Short Term and Long
Term Debt are Different
Short Term
• Domestic discretionary spending* is not the problem
– Historical range: 3.2% -5.25% of federal spending
– 2011: 4.3%
– 2014: 3.2% (match recent historical low)
– 2016: 2.8% (new historical low)
• 2019 projected debt ($ trillions) 20.0
– Wars in Iraq & Afghanistan 2.3
– Medicare Drug Program 1.2
– Stimulus (2008-2012 tax cuts & spending) 1.7
– Bush era tax cuts 2001-2012 3.2
– Bush era tax cuts 2013-2019 4.1
– Baseline debt & other 3.1
* HHS (minus Medicare/Medicaid), Transportation, Agriculture, Judiciary, Education, HUD,
Interior, EPA, NASA, etc
12. 5‐15
Annualized Spending Increases by President
Note: All start with President’s 1st
budget which is 2nd year in office
15. A crisis
that will cause
our nation’s economy
to implode
16. Primary Spending and Revenues, by Category, Under CBO’s
Long-Term Budget Scenarios Through 2085
Percentage of GDP
Source: Congressional Budget Office, 2012
21. Most Medical Spending is Tied to
Chronic Diseases
All spending… Medicaid Medicare
83% 96%
Share spent on pa?ents with chronic diseases
Source: Partnership for Soluons. Chronic Condions: Making the Case for Ongoing Care. September 2004 Update. Available at: hap:// 21
www.rwjf.org/files/research/Chronic%20Condions%20Chartbook%209‐2004.ppt. Accessed on April 17, 2007.
22.
23. The Population Age 65 or Older as a
Percentage of the Population Ages 20 to 64
Percent
23
Source: Congressional Budget Office, 2012
24.
25. Can We Reduce Our Federal
Deficit and Create Jobs by Making
the Healthy Choice the Easiest
Choice?
26. ROI Workplace Health Promotion Programs
Meta-analysis
Study focus
# studies
# studies
Sample size (m)
Duration
Savings
Costs
ROI
w/costs
(years)
Medical costs
22
13
3,201
3.0
$358
$144
3.27
Absenteeism
22
15
2,683
2.0
$294
$132
2.73
Source: Baicker K, Cutler D, Song Z, Health Affairs, Feb 2010
28. Progression of Disability by Age
University of Pennsylvania Study 1986-2005
w/60% of cohort dead
‐delay disability 10 years
‐delay death 3.5 years
‐compress disability 6.5 years
Fries JF,et al. J Aging Res 2011, Ar/cle ID 261702.
29. A caution to health promoters
Better health delays onset of disability.
We don’t yet know if improving health
will compress morbidity, or just delay it,
extend life, and possibly increase
lifetime medical costs.
30. A caution to policy makers
If the federal government increases the
retirement age and people are not healthy
enough to work, people will not work, tax
revenues will not increase and costs of the
Social Security Disability Program (SSDI)
will increase.
31. Back of the Spreadsheet
Calculations
If improving health of the population can…
• expand years of working life 5 months, it will reduce the federal debt 1.6%
• expand years of working life 4.5 years, it will reduce federal debt 16%
• expand years of working life 9 years, it will reduce federal debt 32%
• reduce annual rate of increase of Medicare .1 percentage point, it will reduce the
federal debt 1.5%
• reduce annual rate of increase of Medicare 1 percentage point, it will reduce the
federal debt 15%
• reduce annual rate of increase of Medicare 2 percentage point, it will reduce the
federal debt 30%
and, oh yea, improve the wellbeing and quality of life of millions of people
32. • Is my math right?
• What needs to happen to
achieve this level of change?
The beginning of the framework to
answer these questions………
33. If we agree that improving
health provides the best strategy
to preserve the fiscal solvency of
our nation how do
we improve health?
35. Priorities
1. Provide opportunities for the most disadvantaged
– So they can work and pay taxes
– To reduce/eliminate Medicaid spending
– To reduce disease and costs linked to poverty and inequality
2. Focus mission of federal departments
3. Provide opportunities to enhance the health and wellbeing
of the full population
36. Fair Society Healthy Lives
(The Marmot Review)
Social Determinants of Health
1. Give every child the best start in life
2. Enable all children, young people and adults to
maximize their capabilities and have control over
their lives
3. Create fair employment and good work for all
4. Ensure healthy standard of living for all
5. Create and develop healthy and sustainable places
and communities
6. Strengthen the role and impact of ill-health
prevention.
Source: Fair Society Healthy Lives, Instute for Health Equity, 2010
37. Focus Mission of Federal
Departments
• Department of Agriculture: support an agriculture industry that can
provide the most nutritious food to the greatest number of people at an
affordable price.
• Department of Transportation: support transportation modes that
move people and products efficiently, but do so in a way that enhances
health through active transportation modes, facilitates social interaction
and creation of a sense of community, and minimizes environmental
toxins.
• Department of Education: improve the intellectual achievement, but
also the physical, emotional, social, and spiritual health of the youth of
the nation.
38. Weave a web of support that
reaches people several times
each day with the most effective
strategies where they work,
shop, study, worship and relax.
39. Funding from Organizaons that Benefit to Organizaons that Can Engage People
in Effecve Programs
State
Employers US Treasury Insurers CMS Medicaid
Hospitals
Work
places
? Clinics
Clubs Child
K‐12 Parks care
Faith
Schools Groups
Colleges
Fitness Health Restaurants
People
Centers promoon grocers
providers
Source: O’Donnell, AJHP, July, 2012
40. Definition of Health
Promotion
Health Promotion is the art and science of helping people discover the
synergies between their core passions and optimal health,
enhancing their motivation to strive for optimal health, and
supporting them in changing their lifestyle to move toward a state
of optimal health.
Optimal health is a dynamic balance of physical, emotional, social,
spiritual, and intellectual health.
Lifestyle change can be facilitated through a combination of learning
experiences that enhance awareness, increase motivation, and
build skills and, most important, through the creation of
opportunities that open access to environments that make positive
health practices the easiest choice.
Michael P. O'Donnell (2009) Definition of Health Promotion 2.0: Embracing Passion, Enhancing Motivation, Recognizing
Dynamic Balance, and Creating Opportunities. American Journal of Health Promotion: September/October 2009, Vol. 24,
No. 1, pp. iv-iv.
42. Private Sector Takes the Lead, State and
Federal Governments Do Their Share
• Employers support their employees at work
• Employers support families of employees at home, in school, at college,
in church, in the park, at the club, in community organizations…where
ever they are…
• Insurance companies reach customers at work, in the doctor’s office, in
school, in college…where ever they are…
• Medicare and Medicaid reach members at home, in the doctor’s office,
at church, in community organizations…where ever they are…
43. Budget
• Budget: $200/person year * 310,973,329 million ≈ $62,394,665,883/year
• Existing funding for public
(health RWJF October 2011 Policy Highlight Brief)
– $40.84/person in 2005^ 490%
• Existing workplace health promotion industry
– $2 billion 3200%
• Liquid assets on non-farm, non-financial balance sheets
(Federal Reserve quarterly Flow of Funds Q4, 2011)
– $2.23 trillion* 2.8%
• Spending in medical care in United States
– 2.9 trillion 2.15%
But, short term benefits may cover all costs in the short term
in addition to reducing the federal deficit in the long term
44. Funding from Organizaons that Benefit to Organizaons that Can Engage People
in Effecve Programs
State
Employers US Treasury Insurers CMS Medicaid
$2.36 billion $4.5 billion
$34.4 billion $16.1 billion
$4.9 billion
$20.7 billion Hospitals
?
$24.1 billion
Work Clinics
places
$4.3 billion
$10.8 billion Clubs Child
K‐12 Parks care
Faith
Schools $3.95 billion Groups
Colleges
Fitness Health Restaurants
People
Centers promoon grocers
providers
Michael P. O'Donnell, PhD, MBA, MPH,2012
45. Comprehensive health promotion programs
for all people where they work, live and play
Babies at home or in child care 21,645,000
Children 5-17 in school 54,109,000
Young adults 18-24 * 30,904,000
Working age 25-64 165,104,000
Retirement age 65+ 40,211,000
total 311,973,000
* enrolled in college: 19.764 million
46. Health Promotion Funding for
Schools and Colleges
K-12 Schools: $10,821,800,000/year
(54,109,000 kids)
Colleges $3,952,000,000/year
(19,764,000 students)
47. Where do people receive their
coverage (post ACA)
Employers: # of employees # of dependents total people
1-99 w/insurance: 28,659,568 20,781,173 49,440,741
1-99 w/o insurance: 13,486,856 9,779,376 23,266,232
100 + self insured: 78,757,127 57,107,123 135,864,250
sub total 120,903,551 87,667,671 208,571,222
CHIP 5,085,107
Medicaid 58,106,000
Medicare 40,211,000
sub total 103,402,107
total 311,973,329
48. How Many Good Jobs Will We
Create?
$60.4 billion in new revenue for health promotion venders
$21.1 billion in new wages (35% of revenues)
280,000 new health promotion jobs at $75,000/job including benefits
$4,540,118,975 in new state $22,530,806,666 in new federal
income tax revenues income tax revenues
49. Sources of Funding
• Employers:
– Self insured: $27,172,849,956 for 135,864,250 employees and dependents
– Small w/insurance: $4,944,074,084 for 50% of the cost for 49,440,741
employees and dependents
– Small w/no insurance: $2,326,623,180 for 50% of the cost for 23,266,232
employees and dependents
• Insurance companies
– Small employers w/insurance $4,944,074,084 for 50% of the cost for
49,440,741 employees and dependents
• State governments:
– Medicaid: $4,532,268,000 for 39% of the cost for 58,106,000 recipients
• Federal government
– Small employers w/no insurance $2,326,623,180 for 50% of the cost for
23,266,232 employees and dependents of
– SCHIP: $1,017,021,400 for 5,085,107 children enrolled
– Medicaid: $7,088,932,000 for 61% of the cost for 58,106,000 recipients
– Medicare: $8,042,200,000 for 40,211,000 recipients
50. Funding May Pay for Itself
• Employers:
– Self insured (100+): Add to employee health plan premium short term, reduced
medical costs by year 2 or 3 and reduced absenteeism (Baicker meta-analysis)
– Small (1-99) w/insurance: Reduced absenteeism (Baicker meta-analysis) + 50%
insurance company offset
– Small (1-99) w/no insurance: Reduced absenteeism (Baicker meta-analysis)+
50% federal offset
• Insurance companies
– Cover with increased health plan premium short term, reduce medical costs year
2 or 3 (Baicker meta-analysis))
• State governments:
– $4,532,268,000 offset by$4,540,118,975 in new state income tax revenues from
growth of health promotion businesses and taxes on increased employer profits
from reduced medical cost. Annual surplus: $7,850,975 .
• Federal government
– $16,148,153,400 off set by $22,530,806,666 in new federal income tax revenues
from growth of health promotion businesses and taxes on increased employer
profits from reduced medical cost. Annual surplus: $6,382,653,266.
51. Sources of Funding (summary)
Funders
State Federal Federal
Employers Employers Insurance governement government government total
Employers:
1-99 w/
insurance: $4,944,074,084 $4,944,074,084 $9,888,148,168
1-99 w/o
insurance: $2,326,623,180 $2,326,623,180 $4,653,246,359
100 + self
insured: $27,172,849,956 $27,172,849,956
sub total $27,172,849,956 $7,270,697,264 $4,944,074,084 $0 $2,326,623,180 $0 $41,714,244,483
CHIP $1,017,021,400 $1,017,021,400
Medicaid
(Federal
share: 61%) $4,532,268,000 $7,088,932,000 $11,621,200,000
Medicare $8,042,200,000 $8,042,200,000
sub total $0 $0 $0 $4,532,268,000 $0 $16,148,153,400 $20,680,421,400
total $27,172,849,956 $7,270,697,264 $4,944,074,084 $4,532,268,000 $2,326,623,180 $16,148,153,400 $62,394,665,883
52. Sources of Funding (detail, thousand $’s)
Funders
Federal
State Federal governme
Employers Employers Insurance governement government nt total
# of # of
Employers: employees dependents total people $200/per $100/per $100/per $200/per $100/per $200/per
1-99 w/
insurance: 28,659,568 20,781,173 49,440,741 $4,944,074 $4,944,074 $9,888,148
1-99 w/o
insurance: 13,486,856 9,779,376 23,266,232 $2,326,623 $2,326,623 $4,653,246
100 + self
insured: 78,757,127 57,107,123 135,864,250 $27,172,849 $27,172,849
sub total 120,903,551 87,667,671 208,571,222 $27,172,849 $7,270,697 $4,944,074 $0 $2,326,623 $0 $41,714,244
41,714,244,483
CHIP 5,085,107 $1,017,021 $1,017,021
Medicaid
(Federal
share: 61%) 58,106,000 $4,532,268 $7,088,932 $11,621,200
Medicare 40,211,000 $8,042,200 $8,042,200
sub total 103,402,107 $0 $0 $0 $4,532,268 $0 $16,148,153 $20,680,421
total 311,973,329 $27,172,849 $7,270,697 $4,944,074 $4,532,268 $2,326,623 $16,148,153 $62,394,665
53. New Federal Tax Revenues (billions)
Increased Corporate Social individual
Profits Income tax Security tax Medicare tax Income tax Total
Taxable
revenue Rates: 10% 35% 27.7% 12.40% 2.90% 20.00%
Employer
medical cost
savings $48.36 $13.40
New health
promotion
vender
revenue $60.39 $6.0, $21.14 $1.67 $2.62 $.61 $4.22
New federal
income tax
receipts $15.07 $2.62 $.61 $4.22 $22.53
New federal spending $16.15
on health promotion
Net
federal $6.38
surplus
54. New State Tax Revenues (billions)
State State
Corporate individual
Income tax Income tax Total
New taxable
revenues Rates: 10% 35% 6.5% 4.75%
Employer medical
cost savings $48.36 $48.36 $3.14
New health
promotion vender
revenue* $60.39 $6.04 $21.14 $.398 $1.00
New state income
tax receipts $3.53 $1.00 $4.54
Total State spending on
health promotion $4.53
Net State $.00785
surplus
*Assumes exisng revenues of $2 billion
55. Additional Savings to Governments Through Reduced
Medical Costs from Employee Wellness Programs
Government
Civilian
Employees Employees Dependents Total Lives Savings
Federal 2,823,777 2,047,533 4,871,310 $1,948,523,814
State 4,399,190 3,189,871 7,589,061 $3,035,624,441
Local 12,407,919 8,997,034 21,404,953 $8,561,981,222
56. Reduce Growth of Medical
Spending
• Projected growth rate
– 1.7% excess above inflation 2012-2021
– Decrease linearly from 1.7% to 0% excess 2022-2085
• Projected inflation
– 2.5% for consumer goods and services
– “For its benchmark, CBO projects that over the 2021–2085 period, the
GDP deflator will increase 0.3 percentage points less per year, on
average, than the consumer price indexes will—about the same
differential that CBOprojects for the years through 2021.” p24 CBO
• NPV 1% lower increase (2.7% discount rate)
– 15 years: 32.6%
– 16 years: 48.9%
58. Positive Progress
• Health Promotion Advocates, a not profit advocacy group created to
integrate health promotion into national health policy has adopted the
concept as their core advocacy effort.
• The Art and Science of Health Promotion Conference has agreed to devote
one educational track of up to eight sessions to focus on this effort at its
March 18-22, 2013 conference to be held in Hilton Head Island, South
Carolina.
• Preliminary conversations have been held with economists who study the
link between health, medical care costs, ability to work, and federal
spending.
• Preliminary conversations have been held with employer groups, health
insurance trade groups, conservative and progressive think tanks and
Congressional offices.
59. Next steps
• Refine our program paradigm…from individual organizations to a
network of organizations making up a community
• Refine our analytic models…expand unit of analysis from organization
to nation and outcome financial measures from medical cost
containment and productivity to Medicare, Medicaid and Social
Security spending and state and federal tax revenue
• Rally support
– We the people
– Employers
– Insurance companies
– CMS
– Congress and the White House
60. Important Next Steps
• General Exposure. Increase the number of people who are intrigued by
this concept and will advocate for it.
• Develop economic models to test the hypothesis that improving health
will reduce spending on Medicare, Medicaid and Social Security and
increase tax revenues.
• Refine the scope and operational protocols of the consolidator function.
• Get feedback from think tanks, advocacy organizations, and employer
and health insurance groups.
• Get feedback from the public health community.
62. How do we rally
support without
creating polarizing
camps?
63. How would you like to help?
• Refining the message
• Refining the economic models
• Refining the program delivery strategy
• Spreading the word
• Engaging partners
– Employers
– Health insurance companies
– CMS
– Congress
– White House
– Think Tanks
64. Help Us
• Send an email with your ideas
volunteers@healthpromotionadvocates.org
65. Can We Reduce Our Federal
Deficit and Create Jobs by Making
the Healthy Choice the Easiest
Choice?