Coping with Rising Health Care Spending: The Mother of All Budget Problems

1. Coping with Rising Health Care Spending: The Mother of All Budget Problems Dr. Alice Rivlin The Brookings Institution University of Southern California March 2, 2006

2. Actual and Projected Deficits

3. Federal Revenue and Outlays (as a Percentage of GDP, 1965-2016) Replace with CBO summary figure 2?Replace with CBO summary figure 2?

4. Composition of Federal Spending2005 Projection Deficit in 2004 = $412 billion (3.6% of GDP) Compares to surplus of $236 billion in 2000 Recession, war, higher spending have played a role but tax cuts primary reason for deterioration Revenues from 20.9% in 2000 to 16.3% in 2004 (lowest share since 1959); spending from 18.4% in 2000 to 19.8% in 2004. Under realistic assumptions, deficits projected to decline slightly in next few years and then rise again to $715 billion in 2015 (3.6% of GDP) By 2030, fiscal gap projected to be twice as big as share of economy; If no change in current policies, no growth miracle, health care costs rise at historic rate.Deficit in 2004 = $412 billion (3.6% of GDP) Compares to surplus of $236 billion in 2000 Recession, war, higher spending have played a role but tax cuts primary reason for deterioration Revenues from 20.9% in 2000 to 16.3% in 2004 (lowest share since 1959); spending from 18.4% in 2000 to 19.8% in 2004. Under realistic assumptions, deficits projected to decline slightly in next few years and then rise again to $715 billion in 2015 (3.6% of GDP) By 2030, fiscal gap projected to be twice as big as share of economy; If no change in current policies, no growth miracle, health care costs rise at historic rate.

5. Entitlement Programs Projected to Absorb Almost All Revenues by 2030

6. CBO Historical and Projected Components

7. National Health Expenditures as a Percentage of GDP

8. Federal Outlays for Health Programs in 2004

9. Status Quo Won�t DoSavings from Deficit Reduction Act of 2005 Compared with Plausible Baseline of Projected Deficits