3.6: Health Care Budget
ESTABLISH A LONG-TERM GLOBAL BUDGET FOR TOTAL HEALTH CARE SPENDING. Other Information:
Establish a global budget for total federal health care costs and limit the growth to GDP plus 1 percent. Commission members,
and virtually all budget experts, agree that the rapid growth of federal health care spending is the primary driver of long-term
deficits. Some Commission members believe that the reforms enacted as part of ACA will “bend the curve” of health spending
and control long-term cost growth. Other Commission members believe that the coverage expansions in the bill will fuel more
rapid spending growth and that the Medicare savings are not sustainable. The Commission as a whole does not take a position
on which view is correct, but we agree that Congress and the President must be vigilant in keeping health care spending under
control and should take further actions if the growth in spending continues at current rates. The Commission recommends setting
up a process for reviewing total federal health care spending – including Medicare, Medicaid, the Children’s Health Insurance
Program, FEHB, TRICARE, the exchange subsidies, and the cost of the tax exclusion for health care – starting in 2020, with
the target of holding growth to GDP plus 1 percent and requiring action by the President and Congress if growth exceeds the
targets. This target should be adjusted to account for any changes in the health care exclusion enacted under tax reform.
The target should be measured on a per-beneficiary basis if it is applied only to certain federal health programs, rather
than globally. If health care costs continue to grow as fast as CBO and the Medicare actuaries project, or even faster as
some Commission members believe will be the case, this process will require Congress and the President to consider further
actions that make more substantial structural reforms. If the reforms in ACA are more successful in controlling costs than
the estimates by CBO and the Medicare actuary suggest, as some Commission members believe, spending growth should be within
the targets and this process would not be triggered. We recommend requiring both the President and Congress to make recommendations
whenever average cost growth has exceeded GDP plus 1 percent over the prior five years. To the extent health costs are projected
to grow significantly faster than that pace, we recommend the consideration of structural reforms to the health care system.
Commissioners have suggested various policy options, including: moving to a premium support system for Medicare; giving CMS
authority to be a more active purchaser of health care services using coverage and reimbursement policy to encourage higher
value services; expanding and strengthening the Independent Payment Advisory Board (IPAB) to allow it to make recommendations
for cost-sharing and benefit design and to look beyond Medicare; adjusting the federal-state responsibility for Medicaid,
such as block grants for acute or long-term care; establishing a robust public option in the health care exchanges; raising
the Medicare retirement age; and moving toward some type of all-payer system.
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