Download Fiscal Pressures: Excess Cost Growth

The Commonwealth Fund
Alliance for Health Reform
Washington DC
Medicare as a Building Block
for Health Reform:
Should Americans Buy In?
June 6, 2008
Steven Lieberman
Contents
1. Assessing “Building Blocks” Proposal
–
–
Many Issues Need More Specification
Questions about “Cost Estimate”
2. Fiscal Pressures: “Excess Cost
Growth”
3. Key Choices:
–
–
–
“Part D” (Bidding) or “FFS” (Gov’t Prices)
Other Strategies (HIT, Comparative
Effectiveness, EHR/EMR, Public Health)
Benefit & Coverage Expansions?
4. Conclusions
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Assessing “Building Blocks” Proposal
Many “Open” Issues
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•
•
•
•
Are tax rates sufficient?
Revenues & costs balanced over time?
Would employers drop worker coverage?
Early retiree costs shifted to taxpayers?
How would private (at risk) plans compete
with government plan(s)? Selection issues?
• How are plan costs & premiums set?
• What are mechanisms for controlling costs?
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Assessing “Building Blocks” Proposal
Not Credible “CBO” Cost Estimate
• Assumes savings from unproven
approaches & unspecified mechanisms
• Costly Medicare expansion & offset unlikely
• Long range costs could skyrocket: Federal
subsidies linked to health care costs
• Tax rate may be too low: maximum tax of
$2600/employee could induce employer’s
dropping of coverage
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Lieberman Consulting LLC
Fiscal Pressures: Excess Cost Growth
Medicare & Medicaid as % GDP
25
20
15
10
5
0
2007
Medicare & Medicaid
2032
Federal Revenues (2007 Actual)
5
2082
Federal Outlays (2007 Actual)
Lieberman Consulting LLC
Revenues as a Percentage of GDP Under
CBO’s Long-Term Budget Scenarios
40
Percent
Actual
Projected
30
Revenues
Medicare and Medicaid
20
Social Security
10
Other Federal Noninterest Spending
0
1962
1972
1982
1992
2002
2012
2022
6
2032
2042
2052
2062
2072
2082
Lieberman Consulting LLC
Fiscal Pressures: Excess Cost Growth
Historical growth averaged 3+% > GDP/capita
• For 2018 - 2082, CBO now projects:
– 1.7% for Medicare & 0.9% for Medicaid
– CBO assumes gradual slowing from historical
levels under current law
• “Most of the [Medicare & Medicaid] increase that
CBO projects will result from rising costs per
beneficiary rather than rising numbers of
beneficiaries [or their aging].” (May 28, 2008 CBO Issue Brief)
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Key Choices: Part D or FFS?
• Is Part D Viable Model for Health
Plans?
– Vigorously competing, at risk plans
– Strong “price signals” to beneficiaries
– Regulation by RFP
• Is FFS Viable for Medicare Extra?
– Complexity & information requirements
– Interest groups & Congress intervention?
– Regulation by “command & control”
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Key Choices: Other Strategies
• Evidence that HIT, EHR/EMR, Public
Health & Comparative Effectiveness:
– Improve health & health care?
– Save money?
• Important policy goals may be worthwhile,
even if they increase costs, but
– Key challenge for maintaining/expanding
coverage remains lowering growth in health care
costs
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Key Choices: Expand Benefits & Coverage
• Expanding Coverage Will Increase Costs
– Covering more people will add costs
– Subsidizing coverage will add costs
– Shifting retiree costs will save companies but cost
taxpayers money
• Enhancing Benefits Will Increase Costs
– Proposed Medicare expansions expensive
• Certainty about How to Spend More
– Uncertainty about how to reduce costs!
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Conclusions
1. Building Blocks has Many Key Parts, but
– Costs don’t add up
– Many open questions
2. Critical to Lower Actual Cost Growth
– CBO projections already assume “success”
– Better at spending money than lowering costs
3. Part D “Bidding” Better Model than FFS?
4. Critical to Invest in More Government
Capacity (CMS, MedPAC, FEHB, etc)
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