The Federal Budget and Health Care Policy

The Federal Budget and Health Care Policy

• 1.
  Presentation at aconference organized by the Economic Policy Innovation Center and the Paragon Health Institute April 25, 2024 Phillip L. Swagel Director The Federal Budget and Health Care Policy For more information about the organizers, see https://epicforamerica.org/ and https://paragoninstitute.org/.
• 2.
  Percent Net interest Noninterest Discretionary Major health careprograms Social Security Other mandatory Total outlays 31 23 16 10 26 28 28 39 0 25 50 75 100 2024 2054 Noninterest outlays 13 87 23 77 Source: Congressional Budget Office, The Long-Term Budget Outlook: 2024 to 2054 (March 2024), Figure 2-3, www.cbo.gov/publication/59711. Composition of Federal Outlays, 2024 and 2054 In CBO’s projections for 2054, net interest costs account for nearly a quarter of all federal outlays, and spending for the major health care programs accounts for two-fifths of noninterest outlays, both of which represent significant increases from 2024.
• 3.
  Projected 0 2 4 6 8 10 2009 2014 20192024 2029 2034 2039 2044 2049 2054 Percentage of gross domestic product Medicaid, CHIP, and premium tax credits and related spending Medicare Source: Congressional Budget Office, The Long-Term Budget Outlook: 2024 to 2054 (March 2024), Figure 2-4, www.cbo.gov/publication/59711. Composition of Federal Outlays for the Major Health Care Programs Growth in spending on Medicare is projected to account for more than two- thirds of the increase in spending on the major health care programs over the next 30 years.
• 4.
  3 Medicare: 11.7 (47.0%) Medicaid and CHIP: 6.3 (25.1%) Employment− based coverage: 5.3 (21.4%) Nongroup coverageand the basic health program: 1.1 (4.2%) Other: 0.6 (2.3%) Trillions of dollars Total: 25.0 Source: Congressional Budget Office, Federal Subsidies for Health Insurance (September 2023), p. 3, www.cbo.gov/publication/59273. Distribution of Total Federal Subsidies for Health Insurance Over the 2024-2033 Period CBO and JCT project that federal subsidies for health insurance will total $25 trillion over the 2024– 2033 period, the 10 years spanned by CBO’s spring 2023 baseline projections. Although employment- based coverage affects the most people, Medicare accounts for nearly half of total federal subsidies for health insurance over that period.
• 5.
  4 Percentage of grossdomestic product 0.35 3.10 2.09 1.33 0.31 4.00 2.03 1.75 Employment-Based Coverage Medicaid and CHIP Medicare Nongroup coverage and the basic health program Employment-based coverage 2023 2033 Source: Congressional Budget Office, Federal Subsidies for Health Insurance (September 2023), p. 2, www.cbo.gov/publication/59273. Total Federal Subsidies For Health Insurance, 2023 and 2033 Measured as a percentage of GDP, federal subsidies for employment-based coverage and for Medicare are projected to rise over the next decade, while those for Medicaid and CHIP and for nongroup coverage and the Basic Health Program are projected to decrease.
• 6.
  5 Percentage of grossdomestic product 6.3 6.0 1.2 2.6 6.3 9.8 5.2 4.7 1.2 5.2 5.9 Major health care programs Social Security 2024 2054 2024 2054 Outlays without effects from additional cost growth or aging of the population Aging of the population Additional cost growth Source: Congressional Budget Office, The Long-Term Budget Outlook: 2024 to 2054 (March 2024), Figure 2-5, www.cbo.gov/publication/59711. Composition of Growth in Federal Outlays for the Major Health Care Programs and Social Security, 2024 to 2054 Growth in spending on the major health care programs is largely driven by cost growth above and beyond that accounted for by demographic changes and the growth of potential GDP per person. Spending on those programs, as well as spending on Social Security benefits, is also boosted by the aging of the population.
• 7.
  6 Percentage of grossdomestic product 0 2 4 6 8 10 2021 2021 2022 2022 2023 2023 2024 2024 2025 2025 2026 2026 2027 2027 2028 2028 2029 2029 2030 2030 2031 2031 2032 2032 2033 2033 February 2023 projection June 2010 projection Actual Source: Congressional Budget Office, letter to the Honorable Sheldon Whitehouse about CBO’s projections of federal health care spending (March 17, 2023), p. 12, www.cbo.gov/publication/58997. CBO’s Projections of Federal Outlays for the Major Health Care Programs In its long-term projections made in 2010, CBO estimated that federal outlays for the major health care programs would increase from 6.8 percent of GDP in 2023 to 8.5 percent of GDP in 2033. In its 2023 projections, the agency expected federal spending on those programs, measured as a percentage of GDP, to grow more slowly over that 10-year period, increasing from 5.8 percent of GDP in 2023 to 6.9 percent of GDP in 2033.
• 8.
  7 CBO is assessingthe role of health behaviors and preventive measures beyond the usual 10-year budget window. In particular, how would long-term health trajectories be affected by: § Expanding insurance coverage of anti-obesity medications, at different ages; and § Expanding diagnosis and treatment of Hepatitis C? Health Over the Life Cycle
• 9.
  8 CBO is assessingthe roles of federal policies and other factors. For example, some policies have incentives for providers to move out of independent practices and into larger systems. CBO is studying effects on: § Prices, § Site of care, and § Utilization patterns. Competition and Related Policies
• 10.
  9 Promoting price transparency Promoting competition amongproviders Capping the level or growth of prices Targeting consumers’ and employers’ limited sensitivity to prices paid to providers Targeting the market power of providers Regulating prices paid to providers Small price reductions Moderate to large price reductions Very small price reductions Policy approach Effects on prices Mechanism Source: Congressional Budget Office, Policy Approaches to Reduce What Commercial Insurers Pay for Hospitals’ and Physicians’ Services (September 2022), www.cbo.gov/publication/58222. Policy Approaches to Reduce What Commercial Insurers Pay for Hospitals’ and Physicians’ Services
• 11.
  10 Source: Congressional BudgetOffice, Options for Reducing the Deficit, 2023 to 2032—Volume I: Larger Reductions (December 2022), Table 1, www.cbo.gov/publication/58164. Options for Larger Spending Reductions for Fiscal Years 2023 to 2032 That Relate to Health Care Savings Option Title 2023–2032 1 Establish Caps on Federal Spending for Medicaid 501 to 871 2 Limit State Taxes on Health Care Providers 41 to 526 3 Reduce Federal Medicaid Matching Rates 68 to 667 4 Increase the Premiums Paid for Medicare Part B 57 to 448 5 Reduce Medicare Advantage Benchmarks 392 6 Reduce Tax Subsidies for Employment-Based Health Insurance 500 to 893 7 Reduce Social Security Benefits for High Earners 40 to 184 8 Set Social Security Benefits to a Flat Amount 270 to 593 9 Increase the Maximum Taxable Earnings That Are Subject to Social Security Payroll Taxes 670 to 1,204 10 Reduce Spending on Other Mandatory Programs 580 11 Reduce the Department of Defense’s Annual Budget 995 12 Reduce Nondefense Discretionary Spending 332 13 Increase Individual Income Tax Rates 502 to 1,329 14 Eliminate or Limit Itemized Deductions 541 to 2,507 15 Impose a New Payroll Tax 1,136 to 2,253 16 Impose a Tax on Consumption 1,950 to 3,050 17 Impose a Tax on Emissions of Greenhouse Gases 571 to 865 Billions of dollars Projected Savings From Options for Reducing the Deficit