And that wasn’t even the worst news. CBO’s alternative scenario assumes that Congress and the president will avoid the pain of scheduled spending cuts, tax increases, and cuts to physician reimbursement in Medicare. Under this alternative – though far more realistic – scenario “deficits and debt would be significantly higher.”
The key driver is the astonishing growth of federal healthcare spending. A relatively paltry $885 billion in 2013 will balloon to nearly $2 trillion a year within the decade. $14 trillion in total.
Medicare and Medicaid spending will double. Future Medicare spending will accelerate even faster, as the number of seniors 85 years and older will double by 2025 and increase ﬁve-fold by 2050, according to the Census.
By 2023 approximately 175 million Americans – more than half the population – will get their health insurance through Medicare (65 million), Medicaid (84 million), and ObamaCare subsidies (26 million).
CBO also threw a bucket of cold water on ObamaCare. They estimated that the cost of the Affordable Care Act over the coming decade will increase to $1.3 trillion, even though three million fewer people will be insured. Spending on insurance subsidies, revenue from tax penalties on businesses, and the number of Americans who will lose their employer-sponsored insurance will all go up.
All the while healthcare costs will continue to grow unabated – by 40 percent over the coming decade, according to the latest report on health expenditures by the Centers for Medicare and Medicaid Services.
In essence, government will borrow more money to insure more people at ever rising costs.
If there was ever a need for wake-up call, it should be now. Congress must act to avoid the catastrophe that is coming. And all options should be on the table.
The Kaiser Family Foundation recently published a phenomenally helpful menu of options that Congress could choose from. Every major proposal to restrain Medicare growth, both good and bad, is explored, including citations of cost estimates.
Federal tort reform could save as much as $57 billion. A uniform deductible with benefit design changes could save $93 billion. Raising the eligibility age could save $113 billion. Restricting first-dollar coverage in supplemental plans could save $53 billion.
Premium support, with more consumer choice and competition, is explored. While there are few details on potential savings, we know that choice and competition can dramatically lower costs in Medicare. Just look at the prescription drug benefit where costs are 40 percent below original estimates.
There are a plethora of program integrity improvements to combat waste, fraud, and abuse, including many of the bipartisan solutions recently outlined by Senators Max Baucus (D-Mont.), Tom Coburn (R-Okla.), and other members of the Finance Committee.
The biggest untapped potential for Medicare savings and improvement is on the care delivery side. Preferred provider networks, outcomes-based payment, and promoting coordinated care models have demonstrated results in improving care and lowering costs.
These are all big changes in Medicare, and many should be made in Medicaid as well. CBO Director Douglas Elmendorf was correct when he said, “Small changes in budget policy will not be sufficient to put the budget on a sustainable path.”
Unfortunately, small change is typical of Washington. And judging by the president’s platitudes in last night’s speech, we may have to wait until 2017 for a new president working with a like-minded Congress to address them.
That would be unacceptable. The president and members of Congress are in power to fix problems, not to create and then sidestep them. America should demand action now. Lest we will all pay a very dear price in the future.
Merritt is a partner and managing director at Leavitt Partners, the healthcare intelligence firm led by former HHS Secretary Mike Leavitt.