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Let's Get Specific: Healthcare

September 30, 2010 |

The Let’s Get Specific series is intended to help focus the national discussion on specific policies that could help to reduce the deficit and create a better understanding of the types of policy changes that will be required. The policies recommended in this series are not necessarily endorsed by all the members of the Board of the Committee for a Responsible Federal Budget.

Fig. 1: Summary of Recommendations

Short-Term Policies

10-Year Savings

($Billions)

Increase Cost-Sharing

$150

Enact Medicare Malpractice Liability Reform

 $60

Limit Tax Exclusion on Employer-Provided Health  Care

$250

Increase Medicare Eligibility Age to 67

 $601

Strengthen the Independent Payment Advisory Board (IPAB)

 $30

Creating a Health Care Budget  OR Introducing Premium Support

N/A

TOTAL SAVINGS

$550

The continued growth of federal health programs represents the single largest threat to the nation’s fiscal health. By 2015, Medicare, Medicaid, exchange subsidies, and other federal health spending will reach 6 percent of GDP under CBO’s Alternative Fiscal Scenario. The revenue loss from the tax exclusion on employer-provided health care will equal another 1.3 percent of GDP. And these costs will only grow. The Congressional Budget Office projects direct federal health care costs will total 9.7 percent of GDP by 2030, and 13.7 by 2050.

Two factors are responsible for this projected growth. First, the population is aging as a result of growing life expectancy and the retirement of the baby boom generation.  This will increase the number of retirees collecting Medicare and long-term care benefits under Medicaid. Second and more importantly, overall health care costs are projected to grow significantly faster than the economy, resulting in a large increase in per-person health care costs—not only in the private sector but for public insurance programs as well.

The full PDF of this policy paper can be downloaded at the right. You can also view this policy paper on CRFB.org.