Transcript Slide 1
Saving Our Future Tough Choices in Health Care & for the Budget
Iowa Committee for Value in Healthcare Des Moines April 2, 2009 Eugene Steuerle Vice-President The Peter G. Peterson Foundation
More Beneficiaries, Less Workers
Source: The Social Security Administration The Future of Social Security (2008) 2
Projected Real Health Care Costs Per Person 2008-2050 (2008 Dollars)
35 000 30 000 25 000 20 000 15 000 10 000 5 000 0 Source: Congressional Budget Office, U.S. Census and PGPF calculations.
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Sources of Growth in Projected Federal Spending on Medicare and Medicaid
Source: Congressional Budget Office 2008 4
Federal Social Security, Medicare, and Medicaid Outlays, FY 1940-2080
26.0% 24.0% 22.0% 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 1940 1950 1960 1970 1980 1990 2000
Medicaid Medicare Social Security
2010 2020 2030 2040 2050 2060 2070 2080 Note: Authors used January 2007 CBO data for Social Security, Medicare, and Medicaid through 2017, and grew Social Security and Medicare levels with 2006 Trustees data and Medicaid with 2005 CBO data.
Source: C. Eugene Steuerle, Adam Carasso, Gillian Reynolds, The Urban Institute, 2007.
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Social Security and Expected* Medicare Benefits for Average-Wage, Two-Earner Couple ($43.7k each)
$1 600 000 $1,472,000 Medicare Social Security $1 400 000 $1 200 000 $1 000 000 $800 000 $907,000 $600 000 $400 000 $289,400 $575,000 $200 000 $0 1960 1985 2010 2035
Year Cohort Turns 65
* Expected rather than realized benefits. Notes: The “average” wage profiles are those hypothetical profiles used by the Social Security Administration in its analyses. Lifetime amounts are rounded and discounted to present value at age 65 using a 2 percent real interest rate and adjusted for mortality. Projections based on intermediate assumptions of the 2008 OASDI and HI/SMI Trustees Reports. Includes Medicare Part D. Source: Adam Carasso and C. Eugene Steuerle, 2008.
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Major Fiscal Exposures ($ trillions) 2000 2008
Explicit liabilities
Publicly held debt Military & civilian pensions & retiree health Other
$6.9
$12.2
Commitments & contingencies
E.g., PBGC, undelivered orders
Implicit exposures Total
Future Social Security benefits Future Medicare Part A benefits Future Medicare Part B benefits Future Medicare Part D benefits
0.5
13.0
3.8
2.7
6.5
--
$20.4
Source: PGPF analysis of 2000 and 2008 Financial Report of the United States Government.
Note: Estimates for Social Security and Medicare are at present value as of January 1 of each year and all other data are as of September 30.
1.3
42.9
6.6
12.7
15.7
7.9
$56.4
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A Budget for a Declining Nation?
Less saving (long-run)
Less work
Reduced investment
Increased dependence upon foreign lenders
Reduced investment in our children
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Key National Indicators: Where the United States Ranks The United States may be the only superpower, but compared to most other OECD countries on selected key economic, social, and environmental indicators, on average, the U.S. ranks
17 OUT OF 28
Population/Migration
Macroeconomic Trends
Prices OECD Categories for Key Indicators (2007 OECD Factbook)
Energy
Environment
Labor Market Science & Tech.
Education Public Finance
Source: PGPF analysis of 2007 OECD Factbook
Quality of Life
Economic Globalization
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The Current Squeeze 23.0% 22.0% 21.0% 20.0% 19.0% 18.0% 17.0% 16.0% 15.0% 14.0% 13.0% 12.0% 11.0% 10.0% Receipts (if tax cuts made permanent)* Resources Left for Other Domestic Outlays Spending on Social Security, Medicare, Medicaid, Defense, International, and Interest 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Source: C. Eugene Steuerle, Adam Carasso, and Gillian Reynolds, The Urban Institute, 2007. Authors' calculations based on data from CBO Budget Outlook (January 2007) and OASDI and HI-SMI Trustees Reports (2006). * Assumes extension of 2001 and 2003 tax cuts and of expiring tax provisions and a permanent fix to the alternative minimum t ax.
^ Assumes a m oderate drop in defense and international spending as a percent of GDP.
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SOON…VERY SOON
ANY spending on education, environment, welfare,
community development and most domestic programs, as well as deficit reduction, must be paid for out of:
Rescinding of tax cuts or tax increases
Pared growth in health and retirement spending
A larger economy through additional work and saving
A very small international and defense presence
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Deficits as a % of GDP (1950-2019)
14 12 10 8 0 -2 -4 6 4 2 President's Budget Current Law Source: Office of Management and Budget FY09 Historical Tables and Congressional Budget Office Updated Budget and Economic Outlook (March-09) 12
Projected Composition of the President’s Budget
14 12 10 8 6 4 2 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Medicare, Medicaid & Social Security Net Interest Defense Other Spending Source: Congressional Budget Office Updated Budget and Economic Outlook (March-09) 13
Tomorrow’s Problems Are Now Today’s
Long-term budget unsustainable before crisis
Stimulus & financial fix necessary…but
Cause large increases in debt and interest
Threaten higher interest rates as well
Threaten recovery if U.S. bonds not AAAAA
Recovery Phase (hopefully)
Unwinding large increases in debt
Reducing ever-growing demographic and health costs pressures
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Trends in Health Care Costs vs. Wages
8 000
Health Care Costs Per Person Real Median Household Wages
100 000 6 000 80 000 60 000 4 000 2 000 0 40 000 20 000 0 Source: Congressional Budget Office, U.S. Census and PGPF calculations 15
Projected Real Health Care Costs Per Person 2008-2050 (2008 Dollars)
35 000 30 000 25 000 20 000 15 000 10 000 5 000 0 Source: Congressional Budget Office, U.S. Census and PGPF calculations 16
18,0 16,0 14,0 12,0 10,0 8,0 6,0 4,0 2,0 0,0 Source: OECD 2008
International Context for U.S. Spending Levels Health Care Spending as a % of GDP 1986-2006
United States Germany Canada United Kingdom 17
Estimated Sources of Financing for U.S. Health Care Expenditures Calendar Year 2008 (Total = $2.48 Trillion, Government Sources = $1.44 Trillion) Other Private $170 billion (7%) Private Health Insurance, Employee Share $219 billion (9%) Private Out-Of-Pocket $275 Billion (11%) Private Health Insurance, Employer Share $380 billion (15%) Other Public $293 billion (12%) State Tax Subsidies $39 billion (2%) Medicaid $362 billion (15%) Federal Tax Subsidies $263 billion (11%) Medicare $479 billion (19%) Source: C. Eugene Steuerle, The Urban Institute, 2008. Based on data from the Centers on Medicare and Medicaid and the Budget of the U.S. Government, FY 2009.
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Average Health Care Costs Per Household By Source, 2008 (Total = $20,990; through Government Taxes = $12,140) Out-of-pocket payments $2,330 (11%) Federal Supplemental Medical Insurance Premiums $500 (2%) Federal Hospital Insurance Payroll Tax $1,950 (9%) Personal contributions to private health Insurance $1,860 (9%) Other $940 (4%) Taxes: other federal, state, and local $10,190 (49%) Reduced wages: paid by employers $3,220 (15%) Source: C. Eugene Steuerle, The Urban Institute, 2008. Based on data from the Centers on Medicare and Medicaid and the
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Some of the Trade-Offs
Health versus everything else
Negative cash wage growth in many firms
Health versus other forms of social spending
Education, environment, food, jobs subsidies
Health versus health
Acute care versus prevention
Chronic care versus cure
Insurance versus access & public health
Health care for old versus health care for young
Specialization versus primary care
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The Way Forward Implement statutory budget controls that address discretionary and mandatory spending as well as tax preferences Achieve Social Security reform & especially encourage more work (with gains for health care as well) Reduce the rate of increase in health care costs and more effectively target related taxpayer subsidies and tax preferences Pursue comprehensive health care reform that addresses coverage, cost, quality and personal responsibility (cost growth containment key to increasing coverage) Pursue comprehensive tax reform (including health tax subsidies) Review, re-prioritize and re-engineer the base of the federal government to focus on the future and generate real results Ensure that we have processes that will enable us to achieve the above objectives within a reasonable period of time
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