MEDICARE & SOCIAL SECURITY SPENDING AS A PERCENT OF THE GDP

1
MEDICARE FINANCING
Jack Ebeler, Alliance of Community Health
PlansNASI Medicare AcademyJuly 14, 2006
2
OVERVIEW

• Conventional Wisdom Reality

3
CONVENTIONAL WISDOM

• Social Security is a more difficult
• problem to fix than Medicare.

4
FACT

• Social Securitys problems are
• easier to fix than Medicares.

5
MEDICARE SOCIAL SECURITY SPENDING AS A PERCENT
OF THE GDP, 2005-2080
Medicare
Social Security
2006 and 2005 OASDI Trustees Report, SSA / 2006
Medicare Trustees Report, CMS
6
THE ACTUARIAL DEFICIT AS A PERCENT OF TAXABLE
PAYROLL SOCIAL SECURITY
2006-2030
2006-2055
2006-2080
2006 Medicare Trustees Report
7
THE ACTUARIAL DEFICIT AS A PERCENT OF TAXABLE
PAYROLL SOCIAL SECURITY AND MEDICARE HI
2006-2030
2006-2055
2006-2080
2006 Medicare Trustees Report
8
CONVENTIONAL WISDOM

• The primary reason for Medicares fiscal crisis
  is the aging of the baby boomers.

9
FACTS

• Yes, there will be more elderly as baby boomers
  age. And there will be more of the older elderly
  (85) who need even more health care.
• But health care costs are the main driver of
  Medicares fiscal crisis.

10
SOCIAL SECURITY AS A PERCENT OF GDP, 2005-2050
THE AGING ISSUE
Percent of GDP
Congressional Budget Office The Long-Term
Budget Outlook, 2005
11
MEDICARE GROWTH IF HEALTH COSTS PER CAPITA GREW
AT THE RATE OF GDP MEDICARE AGING
Social Security
Percent of GDP
Medicare (if health costs grow at GDP)
Congressional Budget Office The Long-Term
Budget Outlook, 2005
12
NATIONAL HEALTH SPENDING HAS GROWN FASTER THAN
GDP, 1953-2015
Percent of GDP
CMS National Health Expenditures Health
Spending Projections Through 2015 Changes on the
Horizon, Health Affairs, February 22, 2006 and
National Health Spending In 2004, Health
Affairs January/February 2006 / 1953 data from
Who Shall Live, Victor Fuchs
13
MEDICARE PROJECTED TO CONTINUE TO TRACK HIGHER
COST GROWTH
Medicare (CBO projection)
Percent of GDP
Social Security
Medicare (if health costs grow at GDP)
Congressional Budget Office The Long-Term
Budget Outlook, 2005
14
MEDICARE PROJECTED TO CONTINUE TO TRACK HIGHER
COST GROWTH
Medicare (CBO projection)
Percent of GDP
Health cost growth gt GDP
Medicare (if health costs grow at GDP)
Congressional Budget Office The Long-Term
Budget Outlook, 2005
15
CONVENTIONAL WISDOM

• The answer to rising health care costs is
• greater consumer cost-sharing.

16
FACTS

• Medicare already has high cost-sharing.
• And, the commercial markets move to greater
  cost-sharing has done little to reduce health
  care costs.

17
HEALTH PLAN ENROLLMENTS FOR COVERED WORKERS BY
PLAN TYPE, 1988-2005

• Kaiser/HRET Survey of Employer-Sponsored Health
  Benefits 2005

18
NATIONAL HEALTH SPENDING AS A PERCENT OF THE GDP,
1988-2015
Percent of GDP
CMS National Health Expenditures Health
Spending Projections Through 2015 Changes on the
Horizon, Health Affairs, February 22, 2006 and
National Health Spending In 2004, Health
Affairs January/February 2006.
19
CONVENTIONAL WISDOM

• Medicares financing problems
• are intractable.

20
FACTS

• Congress can and has made tough decisions about
  Medicare financing TEFRA, OBRA, BBA, DRA
• An even stronger approach to underlying health
  costs, and Medicare spending, will be required,
  coupled with new revenues.

21
MEDICARE DOES GROW A LOT AS A PERCENT OF GDP
Congressional Budget Office The Long-Term
Budget Outlook, 2005
22
MEDICARE IS A LARGER SHARE OF GDP, BUT REAL GDP
GROWS AS WELL
Trillions
Congressional Budget Office The Long-Term
Budget Outlook, 2005
23
SOCIAL SECURITY, MEDICARE MEDICAID REACH A
LARGER SHARE (20), BUT STILL OF A MUCH LARGER
GDP
Trillions
Congressional Budget Office The Long-Term
Budget Outlook, 2005
24
THE ISSUES ARE

• How to lower growth in health costs?
• Health care cannot continually absorb more
  andmore, unless it dramatically increases value.
• Can we lower underlying cost growth and Medicare
  spending growth?
• What level of financing and taxation is
  sustainable? Who pays/how?

25
NATIONAL HEALTH SPENDING FLATTENED FROM
1993-2000, BUT THAT WASNT POPULAR
Percent of GDP
CMS National Health Expenditures Health
Spending Projections Through 2015 Changes on the
Horizon, Health Affairs, February 22, 2006 and
National Health Spending In 2004, Health
Affairs January/February 2006 / 1953 data from
Who Shall Live, Victor Fuchs
26
HIGHER SPENDING NOT ASSOCIATED WITH BETTER QUALITY
Baicker and Chandra, Medicare Spending, The
Physician Workforce, And Beneficiaries Quality
Of Care, Health Affairs Web Exclusive, April 7,
2004
27
HIGHER SPENDING NOT ASSOCIATED WITH BETTER
QUALITY SO SAVINGS POSSIBLE
2,000/capita
Baicker and Chandra, Medicare Spending, The
Physician Workforce, And Beneficiaries Quality
Of Care, Health Affairs Web Exclusive, April 7,
2004
28
WHAT ABOUT REVENUES?

• Current picture
• A gap remains
• Coupled with spending constraint, but who pays?
• What is acceptable overall level of taxation?

29
MEDICARE SOURCES OF FINANCING SHORTFALLS, AS
PERCENT OF GDP
30
FEDERAL REVENUES AS A PERCENTAGE OF GDP,
1962-2006
Average Revenues, 1962-2004 18
Congressional Budget Office. The Budget and
Economic Outlook Fiscal Years 2007 to 2016,
Washington, DC, 2006
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THANK YOU

• For more information contact
• Jack Ebeler (Jebeler_at_achp.org)
• Carole Johnson (Cjohnson_at_achp.org)
• Paul Jacxsens (PJacxsens_at_achp.org)
• 202-785-2247
• www.achp.org