1

Congressional Budget Office

Presentation to the National Health Policy Forum

The Outlook for Health CareSpending

January 16, 2007

2

Federal Spending Under CBO’s AlternativeFiscal Scenario

Percentage of Gross Domestic Product

1962 1972 1982 1992 2002 2012 2022 2032 2042 2052 2062 2072 20820

10

20

30

40

Medicare and Medicaid

Actual Projected

Social Security

Other Spending (Excluding debt service)

3

Federal Debt Held by the Public as a Percentage of Gross Domestic Product Under CBO’s Long-Term Budget Scenarios

1962 1972 1982 1992 2002 2012 2022 2032 2042 2052 2062 2072 20820

100

200

300

400

Alternative Fiscal Scenario

Extended- BaselineScenario

Actual Projected

4

Federal Fiscal Imbalance Under CBO’s Long-Term Budget Scenarios

Projection Period Revenues Outlays Fiscal Gap

Extended-Baseline Scenario

25 Years (2008–2032) 20.2 19.5 -0.7

50 Years (2008–2057) 21.3 21.9 0.6

75 Years (2008–2082) 22.1 23.8 1.7

Alternative Fiscal Scenario

25 Years (2008–2032) 18.6 21.4 2.8

50 Years (2008–2057) 18.8 24.1 5.2

75 Years (2008–2082) 19.2 26.1 6.9

Percentage of Gross Domestic Product

5

Contribution of Aging to the Fiscal Gap Under CBO’s Alternative Fiscal Scenario

Percentage of Gross Domestic Product

2008–2032 2008–2057 2008–2082

0

1

2

3

4

5

6

7

8

Pure Effect of Aging Starting from Zero Excess Cost Growth

Additional Effect of Aging Within the Scenario

Portion of the Fiscal Gap Not Attributable to Aging

2.8

5.2

6.9

6

Spending on Health Care as a Percentage of Gross Domestic Product

Percent

1960 1965 1970 1975 1980 1985 1990 1995 2000 20050

2

4

6

8

10

12

14

16

18

Medicare

Medicaid

All Other Health Care

7

Excess Cost Growth in Medicare, Medicaid, and All Other Spending on Health Care

Medicare Medicaid All Other Total

1975 to 1990 2.9 2.9 2.4 2.6

1990 to 2005 1.8 1.3 1.4 1.5

1975 to 2005 2.4 2.2 2.0 2.1

Percentage Points

8

Projected Spending on Health Care as a Percentage of Gross Domestic Product

Percent

2007 2012 2017 2022 2027 2032 2037 2042 2047 2052 2057 2062 2067 2072 2077 20820

5

10

15

20

25

30

35

40

45

50

All Other Health Care

Medicaid

Medicare

9

Sources of Growth in Projected Federal Spending on Medicare and Medicaid

Percentage of GDP

2007 2012 2017 2022 2027 2032 2037 2042 2047 2052 2057 2062 2067 2072 2077 20820

5

10

15

20

Effect of Excess Cost Growth

Effect of the Aging of the Population

10

Medicare Spending per Capita in the United States, by Hospital Referral Region, 2003

Source: www.dartmouthatlas.org.

$7,200 to 11,600 (74)6,800 to < 7,200 (45)

6,300 to < 6,800 (55)5,800 to < 6,300 (60)

4,500 to < 5,800 (72)Not Populated

11

The Relationship Between Quality and Medicare Spending, by State, 2004

73

78

83

88

4,000 5,000 6,000 7,000 8,000

Spending (Dollars)

Composite Measure of Quality of Care

Source: Data from AHRQ and CMS.

12

What Additional Services Are Provided in High-Spending Regions?

Source: Elliot Fisher, Dartmouth Medical School.

13

Variations Among Academic Medical Centers

UCLA Medical Center

Massachusetts General Hospital

Mayo Clinic(St. Mary’s Hospital)

Biologically Targeted Interventions: Acute Inpatient Care

Care Delivery―and Spending―Among Medicare Patients in Last Six Months of Life

CMS composite quality score 81.5 85.9 90.4

Total Medicare spending 50,522 40,181 26,330

Hospital days 19.2 17.7 12.9

Physician visits 52.1 42.2 23.9

Ratio, medical specialist / primary care 2.9 1.0 1.1

Use of Biologically Targeted Interventions and Care-Delivery Methods Among Three of U.S. News and World Report’s “Honor Roll” AMCs

Source: Elliot Fisher, Dartmouth Medical School.

14

Share of Personal Health Care Expenditures Paid Out of Pocket

1975 1985 1995 2005 2015

0

5

10

15

20

25

30

35

33%

26%

17%15%

13%

Percent

15

Concentration of Total Annual Medicare Expenditures Among Beneficiaries, 2001

Percent

Beneficiaries Expenditures

0

10

20

30

40

50

60

70

80

90

100

3.8

11.2

23.5

18.4

43.1

55

15

25

50

Source: CBO based on data from CMS.

16

CBO Health Activities

New Hires and Expanded Staffing– New deputy assistant director (Keith Fontenot) in the Budget

Analysis Division– Health staff agency wide increase from 30 FTEs to 40 FTEs

(Plus 6 new hires)– FY 2009 Plans

Reports and Analysis in 2008– Critical Topics in Health Reform– Health Options

17

Difference in Life Expectancy Between Lowest and Highest Economic Status Decile

Source: Data from Singh and Siahpush 2006

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

At Birth At Age 65

Yea

rs 1980-1982

1998-2000

18

Increase in Life Expectancy and Increase in Difference in Life Expectancy by Economic Status

Source: Data from Singh and Siahpush 2006 and CDC

0

0.5

1

1.5

2

2.5

3

3.5

4

At Birth At Age 65

Yea

rs

Increase in Average LifeExpectancy, 1980-2000Increase in Average LifeExpectancy, 1980-2000

Increase in Average LifeExpectancy, 1980-2000Increase in Difference inAverage Life ExpectancyBetween Lowest andHighest Decile, 1980-2000