Chronic Deficit: Entitlement Crisis? or Health Financing Problem? or Health Financing Problem? Henry...
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Transcript of Chronic Deficit: Entitlement Crisis? or Health Financing Problem? or Health Financing Problem? Henry...
Chronic Deficit:Chronic Deficit:Entitlement Crisis? Entitlement Crisis?
or Health Financing Problem? or Health Financing Problem?
Henry J. Aaron
Bruce and Virginia MacLaury Senior FellowThe Brookings Institution
A “monster at the door.”Robert Samuelson
The prevailing ‘expert’ view
A fiscal cancer, “massive entitlement programs we can no longer afford, exacerbated by a demographic glitch that began more than 60 years ago
David Walker
“...a government in desperate trouble. It’s raising taxes sky high, drastically cutting retirement and health benefits, slashing defense, education, and other critical spending, and borrowing far beyond its capacity to repay.”
Laurence Kotlikoff and Scott Burns
-10.0
-9.0
-8.0
-7.0
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
2010 2020 2030 2040 2050
Projected Budget Deficit or Surplus (excluding interest): Selected Years
Perc
en
t of G
DP
Projected Deficit, including all expenditures (except interest)
and revenues
What Projections Really Show (1)
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
2010 2020 2030 2040 2050
Projected Budget Deficit or Surplus (excluding interest):Excluding Health Care Programs, Selected Years
Perc
en
t of G
DP
Projected Deficit, excluding Medicare and Medicaid and associated
receipts
Projected Deficit, including all expenditures (except interest)
and revenues
What Projections Really Show (2)
…the fiscal problem is entirely a health care
financing problem
The message…The message…
…since taxes are assumed to remain a constant
share of GDP, projections show no other long-term budget problem
…because public and private health carespending move together, there is also a private health care financing problem
0
50
100
150
200
250
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Per capita income
Real Per Capita Income, 2005-2050
0
50
100
150
200
250
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Per capita income
Per capita income less taxes
Real Per Capita Income, Per Capita Income less Taxes 2005-2050
0
50
100
150
200
250
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Per capita income
Per capita income less taxes
Per capita income less taxes and all health care spending
Real Per Capita Income, Per Capita Income less Taxes, and Per Capita Income less Taxes and All Health Care Spending, 2005-2050
Maximum value in
year 2044
The morals of this story…The morals of this story…
1. There is a long term fiscal problem; allall of it is health care
5. There is no practical way to deal with public health carespending other than by general health care financing reform
3. There is an equally urgent private budget problem also stemming from increasing health care spending
4. These problems are important for three reasons: fiscal balance, consumption growth, and health care access and affordability
2. There is no entitlement crisis other than health care