Sustainable Health Spending Under the Ryan Path for Federal Non-Health Spending

Charles Roehrig

Posted 4/5/12 on the Altarum Institute’s Health Policy Forum

Background

If you have followed Parts I and II of this series, you will be aware of the key role played by federal non-health spending in my calculation of the sustainable growth rate in national health expenditures. Given the expanded coverage provisions of the Affordable Care Act, I argued that the sustainable rate of growth in health spending is largely determined by what the nation chooses to allocate to federal health spending in future years. And this allocation is simply the difference between what the nation is willing to provide in total tax revenues and the amount of those revenues being set aside for non-health federal spending.

For example, suppose the nation wishes to keep tax revenues at 18 percent of GDP and set aside 13.5 percent of GDP for non-health spending (under a balanced primary budget). (1) Then the amount available for federal health spending would be 4.5 percent of GDP.  Using 2035 as the target year for bringing federal health spending in line with this target, I calculated that the corresponding growth rate in national health expenditures would be 2.6 percent annually, starting in 2012. This is 2.2 percent below the expected GDP growth rate over this period, and lowers the health spending share of GDP to 10.8 percent by 2035—a stark contrast to the 2011 health spending growth rate (4.5 percent) and share of GDP (18.1 percent).

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What is “Sustainable” Health Spending

Charles Roehrig

Posted 2/3/12 on the Health Affairs Blog

©2012 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.

As we embark upon a presidential campaign season, we can anticipate many lively debates on the topics of taxation and spending in this nation.  As health spending in the Unites States accounts for 18 percent of our gross domestic product – a rate often called unsustainable – it is critical that we be clear-eyed in our understanding of the tradeoffs between tax revenues and a sustainable rate of national health spending.

Few have tried to paint a comprehensive scenario of what a sustainable rate of health spending might look like in the United States. That is what the research team at Altarum institute’s Center for Sustainable Health Spending has endeavored to do in this article.  Only by having a well researched and objective picture of sustainable spending growth can we set measurable targets and track progress toward reaching what should be a national goal of this highest priority.

In an earlier blog on Altarum Institute’s Health Policy Forum, I defined sustainable health spending as a projected growth path of spending that is within what the nation is willing to pay.  I argued that, under the Affordable Care Act (ACA), the protections provided by the federal government reduce the effects of health spending growth on other stakeholders. (See note 1)  Consequently, the sustainability of a given rate of health spending growth largely rests with the federal government’s ability to meet its various health spending commitments, including those added under the ACA.  This, in turn, rests upon the willingness of the citizenry to allocate the necessary tax revenues.  Given the inherent uncertainties regarding the public willingness to pay future taxes, this research is partly hypothetical, but I think it provides insights into the tradeoffs between tax revenues and health spending that contribute to informed decisions about targets for taxes and health spending.

Continue reading “What is “Sustainable” Health Spending”

A Brief History of Health Spending Since 1965

Charles Roehrig

First posted 9/19/11 on The Health Affairs Blog

Copyright ©2011 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.

Since last March when we began tracking national health expenditures (NHE) on a monthly basis, we have been wondering when the health spending share of GDP would hit the 18 percent threshold. The recent downward revision of historical GDP estimates has provided the answer – it already happened — back in the summer of 2009, around the time when the recession was declared officially over. (Altarum Institute Health Sector Economic Indicators Spending Brief). It has moved up and down a bit since and, as of June 2011, sits at 18.2 percent. When Medicare was created back in 1965, the share was a shade under 6 percent. In this blog, I trace the growth in the health spending share of GDP from 1965 to present and identify some important historical patterns including evidence of two significant bends in the curve.

Continue reading “A Brief History of Health Spending Since 1965”