Rohan Jaitley: Central Gov't Standing Counsel for Justice
Assessing Effects on the Federal Budget of Policies to Promote Health and Prevent Disease
1. Congressional Budget Office
July 13, 2012
Assessing Effects on the Federal Budget of
Policies to Promote Health and Prevent Disease
Presentation to the Alliance for Health Reform
Linda Bilheimer
Assistant Director for Health, Retirement, and Long-Term Analysis
2. Assessing the Cost Impact of Health Interventions:
Key Concepts
■ Costs of Health Care
– Effects on per capita health care spending
■ Cost Effectiveness
– Return on investment
■ Budgetary Impact CBO’s Focus
– Effects on the federal government’s spending and revenues
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3. Considerations in Estimating the Budgetary Impact of a
Proposed Health Policy
■ Baselines for Health Care Spending, Health Risks, and
Health Outcomes
■ Behavioral Responses to the Policy
■ Effects on Federal Spending
– Medicare, Medicaid, Social Security (OASI and DI), Supplemental
Security Income, other federal programs
■ Direct and Indirect (Health-related) Revenue Effects
■ Strength of the Evidence Base
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4. Types of Health Promotion and Disease Prevention
Interventions
■ Clinical Preventive Services
■ Community-Based Health Promotion
■ Regulations to Limit Risky Behavior
■ Personal Financial Incentives to Modify Risky Behavior
■ Excise Taxes on Products with Health Risks
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5. Goal of CBO’s Smoking Project
■ Assess the Full Budgetary Consequences of an Increase in the
Federal Excise Tax on Cigarettes
– Consider a 50-cent increase (indexed for inflation and growth in income)
– Focus primarily on changes in outlays and revenues resulting from changes
in health because of the policy
– Estimate effects for the 10-year “budget window” and the longer term
■ Caveats
– Policymakers’ decisions depend on other considerations besides the
budget
– Other policies to improve health would probably have different budgetary
effects
– Strength of evidence was a factor in selecting this case study of a
prevention policy
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6. CBO’s General Analytic Approach
Health Care
Federal Health Care
Spending per
Programs
Capita
Policy Reduction Improvements
Mortality
Intervention in Smoking in Health
Retirement Programs
Labor Market
Disability Insurance
Effects
Revenues
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7. Increase in the Population Because of the Policy
Number of Additional People
70,000
60,000
All Adults
50,000
40,000
65 or Older
30,000
20,000
18 to 64 Years Old
10,000
-0
2013 2016 2019 2022 2025 2028 2031 2034
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8. Average Changes in Health Care Spending and Earnings for
Adults Affected by the Policy
Percentage Change in Health Care Spending per Capita
2013 2016 2019 2022 2025 2028 2031 2034
0
-2
-4
-6
-8
-10
-12
Percentage Change in Earnings per Capita
4
3
2
1
-
0
2013 2016 2019 2022 2025 2028 2031 2034
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9. Effects on Outlays of Increased Longevity and Lower per
Capita Health Care Spending
Percentage of GDP
0.025%
0.020%
0.015%
Effects of Greater Longevity
0.010%
Total Effects on Outlays
0.005%
0.000%
-0.005%
Effects of Lower per Capita Health Care Spending
-0.010%
-0.015%
2013 2018 2023 2028 2033 2038 2043 2048 2053 2058 2063 2068 2073 2078 2083
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10. Effects on Outlays, by Program
Percentage of GDP
0.0025%
0.0020%
Total
0.0015%
0.0010%
Medicare
Social Security
0.0005%
Other
0.0000%
-0.0005%
Medicaid and Exchange Subsidies
-0.0010%
-0.0015%
2013 2016 2019 2022 2025 2028 2031 2034
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11. Health-Related Effects on Revenues
Percentage of GDP
0.012%
0.010% Total Effects on Revenues from
Improvements in Health
0.008%
Effects of Changes in Labor Earnings per Capita
0.006%
Effects of Greater Longevity
0.004%
0.002%
Effects of Lower Health Insurance Premiums and
Related Factors
0.000%
-0.002%
2013 2018 2023 2028 2033 2038 2043 2048 2053 2058 2063 2068 2073 2078 2083
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12. Health-Related Effects on Revenues, Outlays, and the
Deficit
Percentage of GDP
0.014%
Total Effects on Outlays
0.012%
0.010% Total Effects on Revenues from
Improvements in Health
0.008%
0.006%
0.004% Net Effects on the Deficit from
Improvements in Health
0.002%
0.000%
-0.002%
-0.004%
-0.006%
-0.008%
2013 2018 2023 2028 2033 2038 2043 2048 2053 2058 2063 2068 2073 2078 2083
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13. Overall Budgetary Effects of the Policy
Percentage of GDP
0.04%
0.03%
Total Effects on Revenues
0.02%
0.01%
Total Effects on Outlays
0.00%
-0.01%
Net Effects on the Deficit
-0.02%
-0.03%
-0.04%
2013 2018 2023 2028 2033 2038 2043 2048 2053 2058 2063 2068 2073 2078 2083
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14. Main Conclusions
■ Changes in Federal Spending from Improved Health Would Be
Relatively Small
■ Federal Spending Would Be Lower in the First Decade but
Would Begin Rising in the Second or Third Decade
■ Better Health Would Raise Revenues on an Ongoing Basis
■ Combined, Those Health Effects Would Produce Very Small
Declines in the Deficit for About Five Decades
■ The Largest Budgetary Effects Would Come from Excise Tax
Receipts, Dominating Health Effects for at Least 75 Years
For further information, see Congressional Budget Office, Raising the Excise Tax on Cigarettes:
Effects on Health and the Federal Budget (June 2012), www.cbo.gov/publication/43319
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