The Budget
On December 13, 2007, CBO director Richard Orszag testified before the Committee on Budget of the United States House of Representatives.
Significant uncertainty surrounds long-term fiscal projections, but under any plausible scenario, the federal budget is on an unsustainable path—that is, federal debt will grow much faster than the economy over the long run. In the absence of significant changes in policy, rising costs for health care and the aging of the U.S. population will cause federal spending to grow rapidly. If federal revenues as a share of gross domestic product (GDP) remain at their current level, that rise in spending will eventually cause future budget deficits to become unsustainable. To prevent deficits from growing to levels that could impose substantial costs on the economy, revenues must rise as a share of GDP, or projected spending must fall—or some combination of the two outcomes must be achieved.
For decades, spending on Medicare and Medicaid—the federal government’s major health care programs—has been growing faster than the economy, as has health spending in the private sector. The rate at which health care costs grow relative to national income—rather than the aging of the population—will be the most important determinant of future federal spending. The Congressional Budget Office (CBO) projects that under current law, federal spending on Medicare and Medicaid measured as a share of GDP will rise from 4 percent today to 12 percent in 2050 and 19 percent in 2082—which, as a share of the economy, is roughly equivalent to the total amount that the federal government spends today.
This report and testimony are not as "dry" as one would expect. In some respects, the CBO projections lag behind the analyses of many state governments. State governments are even more constrained in terms of debt creation and revenue generation. State governments and communities bear an increasing burden of health care costs relative to federal expenditures for health (particularly through Medicaid, uninsured, and taxes to business). State government leaders are canaries in a mine that appears to have few escape routes.
The Federal "fiscal gap" analysis (difference between federal revenues and outlays as a percent of the GDP adjusted to 2007 dollars) "represents the extent to which the government would need to immediately and permanently either raise tax revenues or cut spending—or do both, to some degree—to make the government’s debt the same size (in relation to the economy) at the end of that period as it was at the beginning."
What are the implications?
Testimony states: "growing budget deficits and the resulting increases in federal debt could lead to slower economic growth. The risking federal debt (particularly under an alternative scenario that includes many expected legislative actions including indexing the alternative minimum tax to inflation and indexes physician payments to Medicare inflation "would affect the capital stock (businesses’ equipment and structures as well as housing). In CBO’s estimation, debt would reduce the capital stock—compared with what it would be if deficits were held to their share of the economy in 2007—by 40 percent in 2050 and would lower real gross national product (GNP) by 25 percent. (GNP rather than GDP is used for this calculation "because rising deficits can increase borrowing from foreigners.")
What is the reader interested in health information technology to conclude?
Setting aside the revenue issues (corporate taxes, AMT, excise, etc.) economic security of our nation seems to depend on an evolutionary but radical approach to managing health care costs. These costs can be managed only if the following conditions are met:
- Follow this link for the CBO report
- Follow this link for the CBO House testimony
- Follow this link for the CBO data (.xls format)
- Follow this link for Rob Conningham's posting (Health Affairs Blog)
Significant uncertainty surrounds long-term fiscal projections, but under any plausible scenario, the federal budget is on an unsustainable path—that is, federal debt will grow much faster than the economy over the long run. In the absence of significant changes in policy, rising costs for health care and the aging of the U.S. population will cause federal spending to grow rapidly. If federal revenues as a share of gross domestic product (GDP) remain at their current level, that rise in spending will eventually cause future budget deficits to become unsustainable. To prevent deficits from growing to levels that could impose substantial costs on the economy, revenues must rise as a share of GDP, or projected spending must fall—or some combination of the two outcomes must be achieved.
For decades, spending on Medicare and Medicaid—the federal government’s major health care programs—has been growing faster than the economy, as has health spending in the private sector. The rate at which health care costs grow relative to national income—rather than the aging of the population—will be the most important determinant of future federal spending. The Congressional Budget Office (CBO) projects that under current law, federal spending on Medicare and Medicaid measured as a share of GDP will rise from 4 percent today to 12 percent in 2050 and 19 percent in 2082—which, as a share of the economy, is roughly equivalent to the total amount that the federal government spends today.
This report and testimony are not as "dry" as one would expect. In some respects, the CBO projections lag behind the analyses of many state governments. State governments are even more constrained in terms of debt creation and revenue generation. State governments and communities bear an increasing burden of health care costs relative to federal expenditures for health (particularly through Medicaid, uninsured, and taxes to business). State government leaders are canaries in a mine that appears to have few escape routes.
The Federal "fiscal gap" analysis (difference between federal revenues and outlays as a percent of the GDP adjusted to 2007 dollars) "represents the extent to which the government would need to immediately and permanently either raise tax revenues or cut spending—or do both, to some degree—to make the government’s debt the same size (in relation to the economy) at the end of that period as it was at the beginning."
What are the implications?
Testimony states: "growing budget deficits and the resulting increases in federal debt could lead to slower economic growth. The risking federal debt (particularly under an alternative scenario that includes many expected legislative actions including indexing the alternative minimum tax to inflation and indexes physician payments to Medicare inflation "would affect the capital stock (businesses’ equipment and structures as well as housing). In CBO’s estimation, debt would reduce the capital stock—compared with what it would be if deficits were held to their share of the economy in 2007—by 40 percent in 2050 and would lower real gross national product (GNP) by 25 percent. (GNP rather than GDP is used for this calculation "because rising deficits can increase borrowing from foreigners.")
What is the reader interested in health information technology to conclude?
Setting aside the revenue issues (corporate taxes, AMT, excise, etc.) economic security of our nation seems to depend on an evolutionary but radical approach to managing health care costs. These costs can be managed only if the following conditions are met:
- The public - both as individuals and as a collective - must understand how their behavior impacts costs both out of their own pockets as well as in terms of economic opportunities for the next generation. We need a clear understanding of the individual and national consequences of our health care decisions both in present and future economic terms.
- Each of us must identify means where we can make wiser resource allocations both in receiving care and forestalling the consequences of chronic illnesses
- Organizations that obscure these costs - particularly if done for organizational gain - profit at the expense of the economic future of the country, must be identified and their behavior changed - through self-regulation or through coercion.
- Every effort to contain costs must be viewed both in terms of the short-term and the long-term. Addition of the long-term costs changes the equation dramatically because some expensive short-term interventions are actually beneficial if they lead to great long-term economic gains. Such interventions include many procedures and therapies that from a short-term perspective are deemed "costly."
- Information technology must not be directed solely at refining the status quo but must also be directed towards innovations that give consumers and providers better knowledge to create an environment where everyone not only focuses on the short steps ahead but also over the horizon to a lifetime of better health.
- Incremental steps are not enough. One must hope that beneficial "disruptive" technologies and behavior changes are identified and adopted over time.
- Can anyone envision an America whose workforce is composed only of a health care service sector providing service to a country whose population is dominated only by other low-wage service workers?
- Is it not apparent that rising health care costs will lead not only to the outsourcing not only of most economically-favorable knowledge workers in manufacturing and engineering but also of the outsourcing of the health professional knowledge workers providing these services?
0 Comments:
Post a Comment
<< Home