Congressional Budget Office

Presentation to the National Health Policy Conference

The Outlook for Health Care Spending

February 4, 2008

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

Projected Spending on Health Care as a Percentage of Gross Domestic Product

Percent

2007 2012 2017 2022 2027 2032 2037 2042 2047 2052 2057 2062 2067 2072 2077 2082

0

5

10

15

20

25

30

35

40

45

50

All Other Health Care

Medicaid

Medicare

Federal Spending Under CBO’s AlternativeFiscal Scenario

Percentage of Gross Domestic Product

1962 1972 1982 1992 2002 2012 2022 2032 2042 2052 2062 2072 2082

0

10

20

30

40

Medicare and Medicaid

Actual Projected

Social Security

Other Spending (Excluding debt service)

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

0

100

200

300

400

Alternative Fiscal Scenario

Extended-BaselineScenario

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 Gross Domestic Product

2008–2032 2008–2057 2008–2082

0

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

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

Source: www.dartmouthatlas.org.

$7,200 to 11,600 (74)6,800 to < 7,200 (45)

6,300 to < 6,800 (55)5,800 to < 6,300 (60)

4,500 to < 5,800 (72)Not Populated

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

CMS composite quality score 81.5 85.9 90.4

Care Delivery―and Spending―Among Medicare Patients in Last Six Months of Life

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.

Medicare Advantage Enrollment and Spending is Growing Rapidly

2003

Actual

2007

Estimate

2017

Projection

Average Enrollment

(in millions)

4.6 8.1 14.3

As share of HI Enrollment (percent)

11 19 26

Spending

(in billions of dollars)

33 72 192

Source: CBO

Note: Coordinated care plans includes HMOs, PPOs, and POS plans. Other group includes 1876 cost plans, healthcare pre-payment plans, and demonstrations.

Growth in Medicare Advantage and Other Group Plans, by Plan Type    

in thousands of enrollees                 

                Change: Jan. 2008 -

  Dec 2005 Jan 2007 Jan 2008 Dec 2005 Jan 2007

Coordinated care plans   5,158   6,360   7,057   1,899   697

Private fee for service   209   1,345   2,062   1,853   717

Subtotal, MA   5,367   7,705   9,119   3,752   1,414

                     

Other Group   755   586   449   -307   -138

                     

Total, Medicare Group   6,122   8,291   9,567   3,446   1,276

Employer Plans are Driving PFFS Growth

"PFFS plans also are attractive to employers and unions throughout the country, because they can readily provide coverage nationwide, including coverage that is adaptable to seasonal changes in residence. Roughly 15 percent of PFFS enrollment in 2007 derives from employer group and union plans, compared to just 5 percent in 2006. One of the largest additions to PFFS employer group enrollment for 2007 was the Michigan Public School Employees Retirement System, which has close to 100,000 retirees."

– Abby L. Block, (Director, Center for Beneficiary Choices, CMS), Testimony on Medicare Advantage Private Fee-For-Service Plans before the W&M Health Subcomm, May 22, 2007

“Dear Provider: Your patient is enrolled in DESERET SECURE, our new Medicare Advantage Private Fee-for-Service plan. Beginning January 1, 2007, Deseret Secure (and Deseret Secure PLUS, which includes a higher prescription drug benefit) replaces all our existing plans for our members on Medicare, including our HCPP and Medicare supplement products."

– Letter from Deseret Mutual Benefit Administrators (established in 1970 to serve the employee insurance and retirement needs of employees of the Church of Latter-day Saints).

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