Health Care: Capturing the Opportunity in the Nation's Core Fiscal - - PowerPoint PPT Presentation

Congressional Budget Office

Presentation for Princeton University

Health Care: Capturing the Opportunity in the Nation's Core Fiscal Challenge

March 12, 2008

Federal Spending Under CBO’s Alternative Fiscal Scenario

Percentage of Gross Domestic Product

1962 1972 1982 1992 2002 2012 2022 2032 2042 2052 2062 2072 2082 10 20 30 40 Medicare and Medicaid Actual Projected Social Security Other Spending (Excluding debt service)

Misdiagnosing the problem

Most discussions in media: aging and demographics Most of the fiscal problem: rising cost per beneficiary, not number or type of beneficiaries

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

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 2082

Effect of Excess Cost Growth Effect of Aging of Population Interaction of Aging and Excess Cost Growth

20 15 10 5

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 2082 100 200 300 400 Alternative Fiscal Scenario Extended-Baseline Scenario Actual Projected

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

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

Percentage of GDP

2008–2032 2008–2057 2008–2082 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

Before we all get too depressed….

Embedded in the nation’s central long-term fiscal challenge appears to be a substantial opportunity:

Can we reduce health care costs without impairing health outcomes?

Medicare Spending per Beneficiary in the United States, by Hospital Referral Region, 2005

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.

What Additional Services Are Provided in High-Spending Regions?

Source: Elliot Fisher, Dartmouth Medical School.

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.

Variation in State-Level Medicare and Overall Health Care Spending per Capita

Source: Based on data from CMS. Coefficient of Variation

1974 1979 1984 1989 1994 1999 2004 0.05 0.10 0.15 0.20 0.25

Variation in Medicare Spending per Beneficiary Variation in Total Health Spending per Capita

Contributions of Major Service Categories to State- Level Variation in Medicare Spending per Beneficiary

Source: Based on data from CMS. Coefficient of Variation 1974 1979 1984 1989 1994 1999 2004 0.05 0.10 0.15 0.20 0.25 Outpatient Post-Acute Care Physician and Laboratory Hospital

Geographic Variation in Health Care Spending per Capita in Selected Countries

Source: Based on data from CMS, HM Treasury (U.K.), and the Canadian Institute for Health Information. Coefficient of Variation

1975 1980 1985 1990 1995 2000 2005 0.02 0.04 0.06 0.08 0.10 0.12 0.14

United States United Kingdom Canada

Concentration of Total Annual Medicare Expenditures Among Beneficiaries, 2001

Percent

Beneficiaries Expenditures 10 20 30 40 50 60 70 80 90 100

3.8 11.2 23.5 18.4 43.1 5 5 15 25 50

Source: CBO based on data from CMS.

Paths toward capturing the opportunity

• Information

– Comparative effectiveness research – Randomized control trials – HIT backbone

• Incentives

– Better care, not more care – Coverage vs. differentiated payments

• Delivery systems
• Health behavior

– Making it easy and simple to lead healthy lives – Chronic disease – Prevention – Behavior and social norms among medical professionals

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

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

Source: Data from Singh and Siahpush (2006) and CDC. At Birth At Age 65 1 2 3 4

Increase in Average Life Expectancy, 1980–2000 Increase in Difference in Average Life Expectancy Between Lowest and Highest Decile, 1980–2000

Years