Budget

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A Dishonest Budget?

February 25, 2011 in Public Policy | No comments

The most recent Federal Budget leaves much to be desired.  There are spending cuts.  The Economist reports that although Mr Obama’s team projects that his budget will cause the deficit will fall “…from a post-war record 11% of GDP in the current fiscal year to 3.1% by 2021. That would stabilise the debt, albeit at a still-lofty 77% of GDP.”  However, the CBO believes that a these figures are too rosy, and it is more likely the deficit will only fall to 7% by 2021.

More important, President Obama did little to reduce the looming three-headed budget catastrophe of Medicare, Medicaid and Social Security.  Michael Cannon notes in particular that the President did little to correct the “Doc Fix”.  To reduce physician payments over time, Medicare implemented the sustainable growth rate (SGR) in 1998.  Congress, however, reverses the reimbursement reductions every year.  Thus, if the full SGR would go into place next year, Medicare physicians would receive 25% less revenue per service than the year before.  This is of course untenable.

Michael Cannon explains how President Obama addressed the ‘Doc Fix’ in the FY2012 Budget.

“Rather than propose a permanent ‘doc fix,’ the Obama administration proposes a temporary and dishonest one.  As shown by the blue bars in the below graph, the administration proposes to delay these cuts until 2014 at a cost of $54 billion.  As shown by the black line, the administration proposes to pay for this additional spending by reducing the rate of spending growth in other areas of Medicare by $62 billion over the next 10 years.  Note that only 6 percent of these Medicare ‘cuts’ will occur in 2012 and 2013.  The other 94 percent of the ‘cuts’ will come after the administration has spent the $54 billion it wants to spend.  Note also that the vast majority of the ‘cuts’ would take effect after Barack Obama is no longer president.   Finally, the president offers no proposals to deal with the cuts in physician payments during the last eight years of the 10-year budget window (as shown by the purple bars).”

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The CBO’s Budget Outlook: Not Good

February 9, 2010 in Medicaid/Medicare, Public Policy | No comments

In January, the CBO released a report titled The Budget and Economic Outlook:  Fiscal Years 2010 to 2020.  A summary of the findings is available on the CBO Director’s blog.  Today, however, I focus on CBO’s evaluation of how changes in health care spending affect the federal budget.

“Medicaid spending (excluding stimulus funding) increased by 9 percent ($18 billion) in 2009—exceeding its 7 percent average annual growth rate of the previous 10 years—largely because higher unemployment boosted enrollment in the program. Medicare outlays (including an offset for premium payments) also rose at a faster rate than the average of the past decade, growing by 10 percent ($39 billion).“

Why did Medicare outlays increase at higher than historical averages?  It is possible that physicians are cost shifting in the face of a bad economy.  With more unemployed workers (and thus fewer privately insured individuals), more physicians may be willing to see Medicare patients or physicians may use supplier induced demand to increase the number of services they supply to this population.  On the other hand, this could simply be explained by the fact as baby boomers retire, there are more Medicare-eligible individuals which will increase cost even if spending per capita increases at historical rates.

Additional large spending outlays last year include the American Recovery and Reinvestment Act of 2009 (ARRA) ($80 billion)–which was largest annual adjustment since 1982–and military operations in Iraq and Afghanistan ($155 billion).

In the long term, the CBO projects that debt levels will continue to rise:

“In addition, the share of the population age 65 or older will continue to expand rapidly. As a consequence, the growth of spending for Medicare, Medicaid, and Social Security will speed up from its already rapid rate…Medicare and Medicaid spending are projected to grow by 7% per year between 2011 and 2010…debt held by the public would reach 98 percent of GDP by the end of 2020, the highest level since 1946.“

The most important point the CBO makes in the report, however, is the following:

“The single greatest threat to budget stability is the growth of federal spending on health care—pushed up both by increases in the number of beneficiaries of Medicare and Medicaid (because of the aging of the population) and by growth in spending per beneficiary that outstrips growth in per capita GDP.”

Source: Congressional Budget Office, “The Budget and Economic Outlook: Fiscal Years 2010 to 2020,” January, 2010.

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Half a billion: UC Budget Gap

May 16, 2009 in Uncategorized | No comments

The state of California is in serious fiscal trouble.  Those troubles extend the state’s flagship university system.  

“The scenario that assumes failure of the May 19 state ballot propositions would leave the UC system with a net budget reduction of $322 million, or 10 percent, in the 2009-10 year. Taken together with the state’s underfunding of student enrollments and inflationary cost increases, the scenario would leave the university with a total budget gap of $531 million in 2009-10. The university’s current state-funded budget is $3.2 billion.”

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How much is a $100m Cut from the Budget?

May 1, 2009 in Taxes | No comments

Obama Budget Cut Visualization.

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