The Congressional Budget Office (CBO) estimates the budgetary impacts of prevention policies by: 1) Establishing baselines for health risks, spending, and outcomes and projecting them over time. 2) Estimating behavioral responses to policies and how these affect health. 3) Calculating how changes in health, spending, and the economy feedback into federal spending and revenues over decades. The CBO uses this framework to analyze policies like cigarette taxes, estimating long-term effects on outcomes like longevity, spending, the deficit, and challenges in the evidence.

1. Congressional Budget Office
Estimating the Budgetary Implications
of Prevention Policies
This presentation provides information published in Raising the Excise Tax on Cigarettes:
Effects on Health and the Federal Budget (June 2012), www.cbo.gov/publication/43319, and
The Budgetary Effects of Expanding Governmental Support for Preventive Care and Wellness
Services (August 2009), www.cbo.gov/publication/20967.
July 9, 2013
Presentation at a Congressional Lunch Briefing
Organized by Representative Michael Burgess

2. C O N G R E S S I O N A L B U D G E T O F F I C E
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
– Federal government’s spending and revenues
CBO’s Focus

3. C O N G R E S S I O N A L B U D G E T O F F I C E
Considerations in Estimating the Budgetary Impact of a
Proposed Health Policy
■ Baselines for health care spending, health risks, and
health outcomes
■ Behavioral responses
– By individuals, employers, state and local governments, health care
providers and insurers, and others
■ Effects of behavioral changes on people’s health
■ Effects of health changes on federal spending
– Medicare, Medicaid, Social Security (OASI and DI), Supplemental Security
Income, exchanges subsidies, other federal programs
■ Other effects on federal spending
■ Direct and indirect (health-related) revenue effects

4. C O N G R E S S I O N A L B U D G E T O F F I C E
Health Promotion and Disease Prevention Interventions
■ 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

5. C O N G R E S S I O N A L B U D G E T O F F I C E
Establishing the Baseline (Part 1)
■ 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?
– Associations with other risk factors
■ 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

6. C O N G R E S S I O N A L B U D G E T O F F I C E
Baseline Projection: Prevalence of Smoking Through 2035
(Based on National Health Interview Survey, multiple years)
Percentage of U.S. Adults
CBO: Raising the Excise Tax on Cigarettes, June 2012

7. C O N G R E S S I O N A L B U D G E T O F F I C E
Establishing the Baseline (Part 2)
■ How do health outcomes associated with the 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?
– Participation and spending in government health, disability, and retirement
programs?
■ And for estimates incorporating changes in GDP….
– Labor force participation?
– Productivity in the workplace?
■ What are the projections of those metrics for 10 (20, 50) years?

8. C O N G R E S S I O N A L B U D G E T O F F I C E
Smoking and Per Capita Health Care Spending
(Based on Medical Expenditure Panel Survey, 2000 to 2008, and National Health Interview Survey 1998 to
2007)
2008 Dollars
CBO: Raising the Excise Tax on Cigarettes, June 2012

9. C O N G R E S S I O N A L B U D G E T O F F I C E
Behavioral Responses and Health Outcomes
■ What responses would the policy induce from
– Individuals?
• Variation among population subgroups
– State and local governments?
– Employers?
– Health care providers and insurers?
■ How would those behavioral responses affect health and
longevity
– Initially and over time?
– Taking behavioral substitutions into account?
■ How sustainable would the responses and effects be?

10. C O N G R E S S I O N A L B U D G E T O F F I C E
Rate of Improvement in Health for Smokers Who Quit
(Based on IARC’s tobacco control report, Surgeon General’s reports)
Percentage Recovery to Health Status of Nonsmokers with Similar Characteristics
Years Since Smoking Cessation
CBO: Raising the Excise Tax on Cigarettes, June 2012

11. C O N G R E S S I O N A L B U D G E T O F F I C E
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?
– Labor force participation and productivity (for estimates
incorporating changes in GDP)

12. C O N G R E S S I O N A L B U D G E T O F F I C E
Fiscal Outcomes
■ How would health, longevity, and associated economic
outcomes affect:
– Federal outlays?
• Medicare
• Medicaid and exchange subsidies
• Social Security (OASI and DI)
• Other federal health and retirement programs
– Federal revenues?
• Changes in the mix of compensation
• Changes in earnings (for estimates incorporating changes in GDP)
■ How would other responses affect federal spending?
– Shifts of existing spending by other stakeholders to the federal
government

13. C O N G R E S S I O N A L B U D G E T O F F I C E
Illustrative Findings
From the CBO Study
Raising the Excise Tax on Cigarettes

14. C O N G R E S S I O N A L B U D G E T O F F I C E
Effects on Federal Outlays of Increased Longevity and
Lower per Capita Health Care Spending
-0.015%
-0.010%
-0.005%
0.000%
0.005%
0.010%
0.015%
0.020%
0.025%
2013 2018 2023 2028 2033 2038 2043 2048 2053 2058 2063 2068 2073 2078 2083
Effects of Greater Longevity
Effects of Lower per Capita Health Care Spending
Total Effects on Outlays
Percentage of GDP
CBO: Raising the Excise Tax on Cigarettes, June 2012

15. C O N G R E S S I O N A L B U D G E T O F F I C E
-0.0015%
-0.0010%
-0.0005%
0.0000%
0.0005%
0.0010%
0.0015%
0.0020%
0.0025%
2013 2016 2019 2022 2025 2028 2031 2034
Total
Social Security
Medicare
Other
Medicaid and Exchange Subsidies
Effects on Federal Outlays, by Program
Percentage of GDP
CBO: Raising the Excise Tax on Cigarettes, June 2012

16. C O N G R E S S I O N A L B U D G E T O F F I C E
-0.002%
0.000%
0.002%
0.004%
0.006%
0.008%
0.010%
0.012%
2013 2018 2023 2028 2033 2038 2043 2048 2053 2058 2063 2068 2073 2078 2083
Total Effects on Revenues from
Improvements in Health
Effects of Changes in Labor Earnings per Capita
Effects of Greater Longevity
Effects of Lower Health Insurance Premiums and
Related Factors
Health-Related Effects on Federal Revenues
Percentage of GDP
CBO: Raising the Excise Tax on Cigarettes, June 2012

17. C O N G R E S S I O N A L B U D G E T O F F I C E
Health-Related Effects on Revenues, Outlays,
and the Deficit
-0.008%
-0.006%
-0.004%
-0.002%
0.000%
0.002%
0.004%
0.006%
0.008%
0.010%
0.012%
0.014%
2013 2018 2023 2028 2033 2038 2043 2048 2053 2058 2063 2068 2073 2078 2083
Total Effects on Outlays from
Improvements in Health
Total Effects on Revenues from
Improvements in Health
Net Effects on the Deficit from
Improvements in Health
Percentage of GDP
CBO: Raising the Excise Tax on Cigarettes, June 2012

18. C O N G R E S S I O N A L B U D G E T O F F I C E
Challenges in Weighing the Strength of the Evidence
■ Sparse or conflicting evidence
■ Lack of risk factor information in some household surveys
■ Weak research designs
– Cross-sectional studies, selection bias issues
■ Publication bias
■ Extrapolations from one subpopulation to another
■ Extrapolations from clinical to community settings