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
Percentage Points
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
Projected Spending on Health Care as a Percentage of
Gross Domestic Product
Percent
50
45
40
35
30
All Other Health Care
25
20
15
Medicaid
10
Medicare
5
0
2007
2012
2017
2022
2027
2032
2037
2042
2047
2052
2057
2062
2067
2072
2077
2082
Federal Spending Under CBO’s Alternative
Fiscal Scenario
Percentage of Gross Domestic Product
40
Actual
Projected
30
Medicare and Medicaid
20
Social Security
10
Other Spending (Excluding debt service)
0
1962
1972
1982
1992
2002
2012
2022
2032
2042
2052
2062
2072
2082
Federal Debt Held by the Public as a Percentage of Gross
Domestic Product Under CBO’s Long-Term Budget Scenarios
400
Actual
Projected
300
Alternative Fiscal Scenario
200
Extended- Baseline
Scenario
100
0
1962
1972
1982
1992
2002
2012
2022
2032
2042
2052
2062
2072
2082
Federal Fiscal Imbalance Under CBO’s Long-Term
Budget Scenarios
Percentage of Gross Domestic Product
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
Contribution of Aging to the Fiscal Gap Under CBO’s
Alternative Fiscal Scenario
Percentage of Gross Domestic Product
8
Pure Effect of Aging Starting from Zero Excess Cost Growth
7
6
Additional Effect of Aging Within the Scenario
6.9
Portion of the Fiscal Gap Not Attributable to Aging
5.2
5
4
3
2.8
2
1
0
2008–2032
2008–2057
2008–2082
Medicare Spending per Capita in the
United States, by Hospital Referral Region, 2003
$7,200 to 11,600 (74)
6,800 to < 7,200 (45)
Source: www.dartmouthatlas.org.
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
Composite Measure of Quality of Care
88
83
78
73
4,000
5,000
6,000
Spending (Dollars)
Source: Data from AHRQ and CMS.
7,000
8,000
What Additional Services Are Provided in
High-Spending Regions?
Source: Elliot Fisher, Dartmouth Medical School.
Variations Among Academic Medical Centers
Use of Biologically Targeted Interventions and Care-Delivery Methods Among
Three of U.S. News and World Report’s “Honor Roll” AMCs
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
50,522
40,181
26,330
Hospital days
19.2
17.7
12.9
Physician visits
52.1
42.2
23.9
2.9
1.0
1.1
Care Delivery―and Spending―Among
Medicare Patients in Last Six Months of Life
Total Medicare spending
Ratio, medical specialist / primary care
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
Growth in Medicare Advantage and Other Group Plans, by
Plan Type
in thousands of enrollees
Change: Jan. 2008 -
Coordinated care plans
Private fee for service
Subtotal, MA
Other Group
Total, Medicare Group
Dec 2005
Jan 2007
Jan 2008
Dec 2005
Jan 2007
5,158
6,360
7,057
1,899
697
209
1,345
2,062
1,853
717
5,367
7,705
9,119
3,752
1,414
755
586
449
-307
-138
6,122
8,291
9,567
3,446
1,276
Source: CBO
Note: Coordinated care plans includes HMOs, PPOs, and POS plans. Other group includes 1876 cost
plans, healthcare pre-payment plans, and demonstrations.
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