Congressional Budget Office July 13, 2012 Assessing Effects on the Federal Budget of Policies to Promote Health and Prevent Disease Presentation to the Alliance for Health Reform Linda Bilheimer Assistant Director for Health, Retirement, and Long Term Analysis Assessing the Cost Impact of Health Interventions: Key Concepts Costs of Health Care Effects on per capita health care spending Cost Effectiveness Return on investment Budgetary Impact CBO s Focus Effects on the federal government s spending and revenues 1
Considerations in Estimating the Budgetary Impact of a Proposed Health Policy Baselines for Health Care Spending, Health Risks, and Health Outcomes Behavioral Responses to the Policy Effects on Federal Spending Medicare, Medicaid, Social Security (OASI and DI), Supplemental Security Income, other federal programs Direct and Indirect (Health related) Revenue Effects Strength of the Evidence Base Types of Health Promotion and Disease Prevention Interventions Clinical Preventive Services Community Based Health Promotion Regulations to Limit Risky Behavior Personal Financial Incentives to Modify Risky Behavior Excise Taxes on Products with Health Risks 2
Goal of CBO s Smoking Project Assess the Full Budgetary Consequences of an Increase in the Federal Excise Tax on Cigarettes Consider a 50 cent increase (indexed for inflation and growth in income) Focus primarily il on changes in outlays and revenues resulting li from changes in health because of the policy Estimate effects for the 10 year budget window and the longer term Caveats Policymakers decisions depend on other considerations besides the budget Other policies to improve health would probably have different budgetary effects Strength of evidence was a factor in selecting this case study of a prevention policy CBO s General Analytic Approach Health Care Spending per Capita Federal Health Care Programs Policy Intervention Reduction in Smoking Improvements in Health Mortality Labor Market Effects Retirement Programs Disability Insurance Revenues 3
Increase in the Population Because of the Policy Number of Additional People 70,000 60,000 All Adults 50,000 40,000 65 or Older 30,000 20,000000 10,000 18 to 64 Years Old 0 Average Changes in Health Care Spending and Earnings for Adults Affected by the Policy Percentage Change in Health Care Spending per Capita 0 2 4 6 8 10 12 Percentage Change in Earnings per Capita 4 3 2 1 0 4
Effects on Outlays of Increased Longevity and Lower per Capita Health Care Spending 0.025% 0.020% 0.015% 0.010% Effects of Greater Longevity 0.005% Total Effects on Outlays 0.000% 0.005% 0 005% 0.010% Effects of Lower per Capita Health Care Spending 0.015% Effects on Outlays, by Program 0.0025% 0.0020% 0.0015% Total 0.0010% 0.0005% 0.0000% Social Security Medicare Other 0.0005% 0 0005% 0.0010% Medicaid and Exchange Subsidies 0.0015% 5
Health Related Effects on Revenues 0.012% 0.010% Total Effects on Revenues from Improvements in Health 0.008% 0.006% Effects of Changes in Labor Earnings per Capita 0.004% Effects of Greater Longevity 0.002% 0.000% Effects of Lower Health Insurance Premiums and Related Factors 0.002% Health Related Effects on Revenues, Outlays, and the Deficit 0.014% 0.012% Total Effects on Outlays 0.010% Total Effects on Revenues from Improvements in Health 0.008% 0.006% 0.004% 0.002% Net Effects on the Deficit from Improvements in Health 0.000% 0.002% 0.004% 0.006% 0.008% 6
Overall Budgetary Effects of the Policy 0.04% 0.03% Total Effects on Revenues 0.02% 0.01% 0.00% Total Effects on Outlays 0.01% 0.02% 02% Net Effects on the Deficit 0.03% 0.04% Main Conclusions Changes in Federal Spending from Improved Health Would Be Relatively Small Fd Federal lspending Would Be Lower in the First Decade but Would Begin Rising in the Second or Third Decade Better Health Would Raise Revenues on an Ongoing Basis Combined, Those Health Effects Would Produce Very Small Declines in the Deficit for About Five Decades The Largest Budgetary Effects Would Come from Excise Tax Receipts, Dominating Health Effects for at Least 75 Years For further information, see Congressional Budget Office, Raising the Excise Tax on Cigarettes: Effects on Health and the Federal Budget (June 2012), www.cbo.gov/publication/43319 7