presented by Robert L. Bixby, Executive Director THE CONCORD COALITION concordcoalition

1. Health Care Cost Growth: An Unsustainable Prognosis presented byRobert L. Bixby, Executive DirectorTHE CONCORD COALITIONwww.concordcoalition.org

2. Washington Needs a Fiscal Wake-Up Call From “We The People” • The Fiscal Wake-Up Tour consists of speakers from diverse perspectives who are increasingly alarmed by the nation’s long-term fiscal outlook. • Our mission is to cut through the usual partisan rhetoric and stimulate a more realistic public dialogue on what we want our nation’s future to look like, along with the required trade-offs. • Elected leaders in Washington know there is a problem, but they are unlikely to act unless their constituents — We The People — demand it.

3. Interest Domestic* Defense Other Entitlements Medicare & Medicaid Social Security Composition of Projected FY 2009 Federal Government Revenues and Outlays(Deficit: $1.67 Trillion) Estate & Gift Taxes ($22 billion) In Billions of Dollars Other Taxes Corporate Taxes Financial Rescue** Social Insurance Taxes Individual Income Taxes Outlays: $3.85 trillion Revenue: $2.19 trillion *Includes all appropriated domestic spending such as education, transportation, homeland security, housing assistance, and foreign aid. **CBO classification of funds allocated for TARP, Fannie Mae, and Freddie Mac. Source: CBO March 2009.

4. Federal Spending vs. Revenues as a Percent of GDP (FY 1980-2009)CBO March Baseline Compared to CBO Estimate of the President’s Budget Actual Projected Percentage of GDP Average outlays: 21.0% Average revenues: 18.3% CBO March 2009 Baseline CBO’s Estimate of the President’s Budget Source: Congressional Budget Office, March 2009.

5. Percent of Debt Held by the Public Owned by Foreigners(1987-2008) Source: United States Treasury Department, Treasury Bulletin, December 2008.

6. National Saving Is Very Low by Historical Standards Source: BEA, NIPA Tables 1.1.5 and 5.1 (2009).

7. Interest Costs Go Through The Roof Billions of Dollars Source: Congressional Budget Office, March 2009.

8. Net Interest Discretionary Mandatory Mandatory spending is consuming a growing share of the budget 1968 1988 2008 28% 44% 42% 38% 53% 66% 6% 9% 14% Source: Congressional Budget Office, January 2009. NOTE: Numbers may not add up due to rounding.

9. Outlays of Select Mandatory Spending Programs (FY 2009 Projected) Source: Congressional Budget Office, January 2009.

10. Automatic Growth in the Big Three Entitlements vs.Growth of Appropriations Increase from 2008 level of spending In Billions of Dollars Total Increase in Spending 2009-2019 Spending for Social Security, Medicare and Medicaid. $6.5 trillion Discretionary Spending $1.4 trillion Source: Congressional Budget Office, January 2009.

11. Social Security, Medicare, & Medicaid as a Percentage of the Federal Budget All other Federal Spending $1.88 Trillion 58% Social Security, Medicare and Medicaid $1.35 Trillion 42% CBO treatment of TARP, Fannie Mae and Freddie Mac: $627 billion Source: Congressional Budget Office, March 2009.

12. America’s Population is AgingPopulation age 65 and Over Percentage of Population Aged 65 and Over Year Source: Social Security and Medicare Trustees’ Report, April 2008.

13. Health Expenditures as a Percent of GDP(1960-2018) *Projected Source: Centers for Medicare and Medicaid Services.

14. Health Care Costs are Rising Faster Than the Economy All Federal Spending In Fiscal Year 2007 Percentage of GDP All Federal Revenues In Fiscal Year 2007 Assumes that health care cost growth will not exceed GDP growth. Assumes that health care cost growth continues at the average rate for the past 40 years (2.5 percentage points greater than GDP growth.) Assumes that health care cost growth rate declines to 1.0 percentage point greater than GDP growth—consistent with the assumption used by the Medicare Trustees. Source: Congressional Budget Office, December 2007.

15. How Paying for Health Care Has Changed(1960-2008) Source: Centers for Medicare and Medicaid Services.

16. Promised Social Security Benefits Exceed Dedicated Tax Revenues Percent of Taxable Payroll Social Security Outlays Social Security Cash Deficits Payroll Tax & Taxation of Benefits Calendar Year Source: Social Security Trustees’ Report—April 2008 (Intermediate Projections).

17. Sources of Medicare Funding

18. Medicare Costs Soar in the Coming Decades As a Percentage of GDP Calendar Year General Revenues required to fund the program Income from dedicated taxes, premiums, and state transfers Source: Medicare Trustees’ Report, 2008.

19. Social Security and Medicare Part A Cumulative Cash Surpluses and DeficitsIn Constant 2008 Dollars—2008 through 2085 $496 Billion: Cumulative Social Security Cash Surplus -$27 Trillion: Cumulative Social Security Cash Deficits -$55 Trillion: Cumulative Medicare Part A Cash Deficits In Billions of Constant 2008 Dollars -82.6 Trillion: Cumulative Social Security and Medicare Part A Cash Deficits 2008 2010 2020 2030 2040 2050 2060 2070 2080 Calendar Year Source: Social Security Trustees’ Report—March 2008 (Intermediate Projections).

20. Social Security, Medicare, Medicaid and Interest Consume All Federal Revenues in 20 Years Percentage of Revenues Year Social Security, Medicare and Medicaid Interest Source: Government Accountability Office, September 2008.

21. Current fiscal policy is on an unsustainable pathFederal Outlays as a Percentage of GDP Interest All Other Medicaid Average tax revenue Medicare Social Security Source: Government Accountability Office, September 2008.

22. Criteria for Medicare Reform • Scope of benefits: Medicare should cover a level of care commensurate with the care available to working-age people. This does not mean that taxpayers must be expected to finance a “high option” insurance plan for all seniors. • Fiscally responsible: A fiscally responsible program is one that can reasonably be expected to operate within the resources available to finance it. A program that assumes a perpetually open spigot from the Treasury is not fiscally responsible. • Income-related cost sharing: Medicare’s premiums, which help fund Parts B (physician care) and D (prescription drugs), should be geared to income levels. Currently, premiums cover only 25 percent of program costs. General tax revenues cover the rest. Given this large subsidy and the need for long-term program savings, beneficiaries who can afford to pay more of their fair share should do so. • Efficient provision of medical care: Whatever new system of medical insurance for the elderly is devised, it should contain incentives for both providers and patients to use resources cost-effectively. Treatments that have little or no promise of achieving any appreciable improvement in a patient’s well-being should not be financed with taxpayer dollars.

23. Key Points of AgreementMembers of the Fiscal Wake-Up Tour do not necessarily agree on the ideal levels of spending, taxes and debt, but we do agree on the following key points: • Current fiscal policy is unsustainable • There are no easy solutions, such as cutting waste fraud and abuse or growing our way out of the problem.  • Finding solutions will require bipartisan cooperation and a willingness to discuss all options. • Public engagement and understanding is vital in finding solutions. • This is not about numbers. It is a moral issue.