Saving Our Future Tough Choices in Health Care & for the Budget Iowa Committee for Value in Healthcare Des Moines April 2, 2009 Eugene Steuerle Vice-President.

Saving Our Future Saving Our Future

Tough Choices in Health Tough Choices in Health Care & for the BudgetCare & for the Budget

Iowa Committee for Value in HealthcareIowa Committee for Value in HealthcareDes MoinesDes MoinesApril 2, 2009April 2, 2009Eugene Steuerle Eugene Steuerle Vice-President Vice-President

The Peter G. Peterson FoundationThe Peter G. Peterson Foundation

More Beneficiaries, Less WorkersMore Beneficiaries, Less Workers

Source: The Social Security Administration The Future of Social Security (2008) 2

Projected Real Health Care Costs Per Person Projected Real Health Care Costs Per Person 2008-20502008-2050(2008 Dollars)(2008 Dollars)

Source: Congressional Budget Office, U.S. Census and PGPF calculations.3

Sources of Growth in Projected Federal Spending Sources of Growth in Projected Federal Spending on Medicare and Medicaidon Medicare and Medicaid

Source: Congressional Budget Office 20084

Federal Social Security, Medicare, and Medicaid Outlays, FY 1940-2080

Social Security

Medicare

Medicaid

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%

24.0%

26.0%

1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

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Note: Authors used January 2007 CBO data for Social Security, Medicare, and Medicaid through 2017, and grew Social Security and Medicare levels with 2006 Trustees data and Medicaid with 2005 CBO data.Source: C. Eugene Steuerle, Adam Carasso, Gillian Reynolds, The Urban Institute, 2007.

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Major Fiscal ExposuresMajor Fiscal Exposures($ trillions)($ trillions)

2000 2008

Explicit liabilities $6.9 $12.2 Publicly held debt Military & civilian pensions & retiree health Other

Commitments & contingencies 0.5 1.3 E.g., PBGC, undelivered orders

Implicit exposures 13.0 42.9 Future Social Security benefits 3.8 6.6 Future Medicare Part A benefits 2.7 12.7 Future Medicare Part B benefits 6.5 15.7 Future Medicare Part D benefits -- 7.9

Total $20.4 $56.4

7Source: PGPF analysis of 2000 and 2008 Financial Report of the United States Government.Note: Estimates for Social Security and Medicare are at present value as of January 1 of each year and all other data are as of September 30.

A Budget for a Declining Nation?A Budget for a Declining Nation?

Less saving (long-run) Less work Reduced investment Increased dependence upon foreign lenders Reduced investment in our children

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Key National Indicators: Key National Indicators: Where the United States RanksWhere the United States Ranks

The United States may be the only superpower, but compared to most other OECD countries on selected key economic, social, and environmental indicators, on average, the U.S. ranks

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OECD Categories for Key Indicators(2007 OECD Factbook)

Population/Migration Energy Environment Quality of Life

Macroeconomic Trends

Labor Market Education Economic

Globalization

Prices Science & Tech. Public

Finance

17 OUT OF 2817 OUT OF 28

Source: PGPF analysis of 2007 OECD Factbook

10.0%11.0%12.0%13.0%14.0%15.0%16.0%17.0%18.0%19.0%20.0%21.0%22.0%23.0%

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

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The Current Squeeze

Resources Left for Other Domestic Outlays

Source: C. Eugene Steuerle, Adam Carasso, and Gillian Reynolds, The Urban Institute, 2007. Authors' calculations based on data from CBO Budget Outlook (January 2007) and OASDI and HI-SMI Trustees Reports (2006). * Assumes extension of 2001 and 2003 tax cuts and of expiring tax provisions and a permanent fix to the alternative minimum tax.^ Assumes a m oderate drop in defense and international spending as a percent of GDP.

Receipts(if tax cuts made permanent)*

Spending on Social Security, Medicare, Medicaid, Defense,

International, and Interest

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SOON…VERY SOONSOON…VERY SOON

ANY spending on education, environment, welfare, community development and most domestic programs, as well as deficit reduction, must be paid for out of:Rescinding of tax cuts or tax increasesPared growth in health and retirement spendingA larger economy through additional work and

saving A very small international and defense presence

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Source: Office of Management and Budget FY09 Historical Tables and Congressional Budget Office Updated Budget and Economic Outlook (March-09)

Deficits as a % of GDPDeficits as a % of GDP(1950-2019)(1950-2019)

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Projected Composition of the President’s BudgetProjected Composition of the President’s Budget

Source: Congressional Budget Office Updated Budget and Economic Outlook (March-09)13

Tomorrow’s Problems Are Now Today’sTomorrow’s Problems Are Now Today’sLong-term budget unsustainable before crisisStimulus & financial fix necessary…but

Cause large increases in debt and interest Threaten higher interest rates as wellThreaten recovery if U.S. bonds not AAAAA

Recovery Phase (hopefully)Unwinding large increases in debtReducing ever-growing demographic and

health costs pressures

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Trends in Health Care Costs vs. WagesTrends in Health Care Costs vs. Wages

Source: Congressional Budget Office, U.S. Census and PGPF calculations15

Source: Congressional Budget Office, U.S. Census and PGPF calculations16

Source: OECD 2008

International Context for U.S. Spending LevelsInternational Context for U.S. Spending Levels

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Some of the Trade-OffsSome of the Trade-OffsHealth versus everything else

Negative cash wage growth in many firmsHealth versus other forms of social spending

Education, environment, food, jobs subsidiesHealth versus health

Acute care versus preventionChronic care versus cureInsurance versus access & public healthHealth care for old versus health care for youngSpecialization versus primary care

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The Way ForwardThe Way Forward

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