Health Care Issues and Challenges for Reform Peter R. Orszag - - PowerPoint PPT Presentation

Congressional Budget Office

Health Care Issues and Challenges for Reform

Peter R. Orszag Director

July 2007

Total Federal Spending for Medicare and Medicaid Under Assumptions About the Health Cost Growth Differential

1966 1972 1978 1984 1990 1996 2002 2008 2014 2020 2026 2032 2038 2044 2050 5 10 15 20 25 Actual Baseline Projection 2.5 Percentage Points 1 Percentage Point Zero Differential of:

Percent of Gross Domestic Product

Excess Cost Growth in National Health Expenditures

Percentage-Point Difference from per Capita GDP Growth Source: Based on data and projections from CMS.

1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016

• 2
• 1

1 2 3 4 5 6 7 8

Ten-Year Moving Average Actual Projected

Annual Growth Rates of Private and Public Health Care Spending

Source: CMS’s data on national health expenditures. Change in Total Nominal Spending from Previous Year

1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2 4 6 8 10 12 14 16 18 20

Private Public

National Health Expenditures, by Source of Funds, 2005

Billions of Dollars Source: Data from CMS.

Consumers' Payments for Private Health Insurance (694.4) Consumers' Out-of-Pocket Payments (249.4) Other Private Funds (141.2) State and Local Governments' Spending (258.8) Federal Spending (643.9)

Public Funds: 902.7 Private Funds: 1,085.0

National Health Expenditures, 2006

Billions of Dollars Source: Data from CMS and the Department of Commerce.

Services by Physicians and Others (662.8) Hospital Care (651.8) Prescription Drugs (213.7) Nursing Home and Home Health Services (179.4) Program Administration and Private Health Insurance (156.8) Investment (134.8) Public Health Activities (61.7) Medical Products (61.5)

Effects of Slowing the Growth of Spending for Medicare and Medicaid

Percent of Gross Domestic Product

1966 1972 1978 1984 1990 1996 2002 2008 2014 2020 2026 2032 2038 2044 2050 5 10 15 20 25

Actual Projection 2.5 Percentage Points Differential of: 1 Percentage Point Beginning in 2025 1 Percentage Point Beginning in 2015

Medicare Spending per Capita in the United States, by Hospital Referral Region, 2003

Source: Dartmouth Atlas of Health Care. $7,000 $7,000 to to 11,352 11,352 (63) (63) 6,500 6,500 to < to < 7,000 7,000 (53) (53) 6,000 6,000 to < to < 6,500 6,500 (56) (56) 5,500 5,500 to < to < 6,000 6,000 (64) (64) 4,272 4,272 to < to < 5,500 5,500 (70) (70) Not Populated Not Populated Source: www.dartmouthatlas.org

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.

Share of Personal Health Care Expenditures Paid Out of Pocket

1975 1985 1995 2005 2015 5 10 15 20 25 30 35

33% 26% 17% 15% 13%

Percent

RAND’s Experiment on Health Insurance Compared spending and health under various insurance designs Found that initial cost sharing could have substantial effects on total spending Cost sharing reduced both effective and ineffective care about equally Design of plan had no impact on health for most enrollees; some benefit of free care for low-income enrollees in the poorest health

Effects of Cost Sharing

Source: Based on data from RAND’s health insurance experiment. Dollars per Enrollee

Free-Care Plan Conventional Plan ($400 deductible, 25% coinsurance, $4,000 limit) High-Deductible Plan ($4,000 deductible and limit) 500 1,000 1,500 2,000 2,500 3,000 3,500

3,440 26% 2,228 15% 2,116

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.