Transcripts For CSPAN3 Medicare Actuary Provides Update On T

Nothing keeps you absolutely safe. Thats the unfortunate fact of life. We are live this morning as the medicare board of trustees is meeting to look at what Congress Plans to do on medicare and medicaid coverage. This is live coverage. Its just getting underway. My name is joe and im in Health Care Retirement policy at aei. I will be introducing the panel in just a second. I did want to highlight a few things that the trustees said in their report. Perhaps their biggest concern has to do with the outlook as they said in their summary, a major concern has to do with the growth of Health Care Innovation which has positives and negatives. The positive is that with modern technology and modern techniques we are able to address the Serious Health conditions of many more people than we have in the past. While most technological advances have tended new the Health Care Landscape is shifting. No one knows if it will inkrocre or decrease costs. Let me also sight a critical point that the trustees made in their report having to do with productivity. The Patient Protection and Affordable Care act or the aca has a provision in it that the Current Administration is not taking any actions to remove, which sets payment reductions according to the growth and general productivity it is for this policy to avoid leading to serious erosion in access to care and quality of care. These are very serious issues. Finally, let me site the i like to think of them as the Public Trustees in exile and they wrote a paper before they saw the report yesterday but they made a very important point, which is that delaying action on medicare is a fiscal challen challenge. So let me introduce the panel. Our first will be the chief actuary of chief medicaid and Medicare Programs to my right. The panel after paul gives his talk the panel will make some comments and well have general discussion and open it up to the audien audience. The next speaker is president of the committee for federal budget. Then theres gene sterling. Then we have bob moffit at Heritage Foundation for Health Policy studies and then finally keith who is a managing director. He has long experienced other related organizations and so with that please give your presentation. All right. Good morning. Thank you. I always appreciate the opportunity to come and talk about the financial status of medicare after we released the annual Trustees Reports. Not in the interest of burying the lead but this years report is not very different than what we have seen in prior years reports. But that is actually a pretty big story that we we have a drastically, a very different the current members of the board of trustees are from have a very different perspective on health care than the Prior Administration. The members of the board of trustees are there are three cabinet officials. The secretary of health and human services, the secretary of treasury, the commissioner of Social Security and theres also two Public Trustees. They do play a very Important Role and that has been vacant over the last couple of years as well. But the fact remains that in a shifting administration with very different perspectives towards health care as evidence from the debate on the Current Health reform efforts, the fact that the underlying approach, the asufrsumptions, the methods i walk through the key findings are not very different. I think that really is a testament to the current and Prior Administration for the role the board of trustees play in these very important programs and that they are free of, you know, political perspective or that they are truly an independent objective of the status of these trust funds. That is a pretty important observation and reality. So ill walk through. It was not triggered this year. Its therefore not getting a significant amount of attention. What has gotten a fair amount of attention has been the part b premium rate. Sh i will do this in a way that you can visualize these are programs that move relatively slowly. Even when they move relatively slowly they can be changes over relatively short periods of time. I like to start my presentations always by putting up this these comparisons. This is comparison of the plit between how the program has evolved and how spending by medicare has changed over time. Each and every year the board of trustees are put out the report that have a 75 year projection. If we were to jump back to just 1976 and look at what the program looked like at that point where this was predominantly an inpatient hospital program, nearly 75 , you know, more than twothirds was for in patient hospital in 1976 as compared to what it looks like today and this thats lot more pieces to that pie. Clearly those the program is a lot more than just in patient hospital. Its also if the pies were bigger they should be much bigger over time. You can see these growing from just under 1 to more than 3. 5 in 2016. Well talk a little bit about continued growth in a little while. But just i would lieng ke to start with this for demonstration. Although it would have been impossible in 1976 to forecast, you know, the construction of that pie it is still actually very important to measure and estimate and evaluate what the anticipated effects are of the current program. A lot of the reasons why this pie looks different is because legislation has changed over time and the program has matured and has evolved and will continue to do so. It will you know, stopping annually and evaluating the current financial status is pretty important process. P one of the reasons why is that this large change in shift towards private plans. This is really looking at Medicare Advantage, penetration rates over roughly a 25 year period. You can see that the rate of take up has been growing very steadily and is forecasting it even more so. There are two really separate and distinct benefits within just the medical person of the program. The hi Hospital Insurance Program Provides in patient hospital care and other, you know, Skilled Nursing home hospice care. One reason why its fornt keep the program separate or to evaluate them separately is because the financing is extremely different between the two. What gets the most attention is data depletion of that trust fund. Well talk about it in a little bit those are financed general and beneficiary premiums. Those are set on an annual basis so they are always in financial ballots. When evaluating the status of those programs its more important, the fact they are always in financial balance means its important to consider the other impacts of such spe spending. So the foundation starts with the new experience. This is comparison of the expectation of 2016 medicare experience between the 2017 report and the 2016 report. It is pretty remarkable. The fangt that expenditures were, you know, 1. 7 billion lower than expected, still good news. On part b side we are almost exactly aligned generally more experience after years a couple of years of higher costs associated with in particular specialty drugs most notably those that treat hepatitis c. So this looks at the income and expenditures. It kind of builts builds up e payroll taxes. They are expected to be 2. 9 of payroll of income. There is additional amount paid in highincome earners, those incomes over 200,000 or 250,000. Building up there are some state transfers and drug fees that go into part d. The gap there is the deficit. That is the amount of expected expenditures that programs would be making most notably by hi after and deficit reflects the gap between those spending from current sources of revenue versus what would be available in the trust fund. So thats the deficit that would be in order to pay full benefits if all asufrpsumptions are real. Well talk more about that. So it has to evaluate the funds. The fact that there are annual part b and part d. No, sir long term sol van si issues. Well also note and there are some potential aspects that might prove mobmatic to maintain into the future. These are 75 year projections. The expectation is it might have to be reductions an access to care or quality of care or some other changes that would account for that gap. For physician updates, it was passed two years ago specifies all price updates for physicians in all future years. So theres a transition period until we get to the point where either physicians are in these events i lost where are we at . Alternative pay method thank you for that. Or in the merit based incentive system. Those rates are specified and will be constant of whether underlying costs for Physician Services are at a faster rate. We anticipate it is closer to 2. 2 . So that gap between what we think underlying physician costs are growing at versus what the payment rates will be updated by will become a concern over time we have concerned they could prove to be properblematic. The trustees have presented an election and current law that to the extent they do not continue into the future. So there is the transitions, the transition that would be experienced into the sector. They are transitioned and basically and the independent payment Advisory Board are not implemented. You can see that a trust fund ratio to the percentage of annual expenditures, the objective is that the short range objective goal is to achieve 100 for all years. You can see that we are clearly below that level today and we are projected to actually become depleted in 2029. You can see the general shape of that curve hasnt changed much but the fact that we did get some experience most notably lowered expenditured. It is for the lengthening you can summarize and it looks at the present value of income rate. So all of the dollars going into the program. All of the dollars going out for benefits and other expenses compared to taxable payroll. You can see income rates really changes very much from year to year. You can see that theres was a slight improvement. As a result the balance has improved. There is less of a deficit this year. So effectively this deficit of. 64 means that if that the current payroll taxes, if those were increased it would be in financial over 75 years. So often it is more interesting when there are bigger changes. You can see this is basically just the walk through of the 2016 report and 2017 report. You can see that the largest contribute to here is the hospital assumptions, so the. 8 . So here is the annual representation of whats happening on the income and the cost rate. A couple things to note here. You can see that basically theres a line that drops from the cost rate down to the income rate. It really represents that when assets are depleted the only amounts of funds that will be available are the amounts coming into the fund. So in 2029 it would provide benefits. You can see the ratios are over time. You can also see the cost rate kind of gets closer to the income rate over time and then kind of stays level there. It is partly again due to some of those productivity offsets. The next slide will throw sorry. This one first compares the cost rates from year to year. This one adds in what those cost rates would look like. You can see that those productivity offsets, which are roughly, you know, 1. 1 as compared to what we think could be achievable in the Health Sector starts off if you only look through 2027 or look through 2040 those gaps are not very large. You can see as you compound out these differences over time in particular over 75 years, those differences get very different. You can see that that cost rate, while it is currently in the 5 range would max out in excess of 8 under that alternative. It highlights what the importance of providing those alternative pro jekss. Projections. As i mentioned on part b in particular, the rates are financed adequately. You always see that the income is going to be very close to what we project for expenditures. So in terms of evaluating financial status, what you can see is that the 2017 is slightly higher than it was for the 2016 report. Its a little more to the story here in part d. There was a notable reduction in anticipated spending in 2016 for on behalf of with respect to hepatitis c related drugs and there was also a significant increase amount of manufacturer rebates coming into the program. These two factors contribute to a significant decrease in the expected expenditures for the Part D Program. This was actually a pretty significant change in what we were experiencing in part d. This summarizes b and d together. You can see under current law we are currently at something a little excess of 2 of total expenditures. Thats expected to grow to a little less than 4 by the end of the projection period. You know, this is another way to look at what was summarized previously. Not much change as a percent of gdp. In 2090 there was part b is slightly higher. And again, the comparison shows that this years report is slightly higher. This one looks at medicare expenditures in total. Again, comparing that current how and it demonstrates that even though when we are looking at under a current law basis a part a program that has a deficit issue, you know, it was expected to be depleted in, you know, roughly 12 years time. To the extent that current law provisions are not implemented and show a large increase of those programs as a share of other relative measures, those potential troubling results could actually be a lot worse to the extent that current law provisions are not able to be implemented. Under drew law expenditures expected to grow to 5 . So the independent payment advisory report has gotten a fair amount of attention. It is expected to be triggered in the 2017 report. It did not happen this year in part because of some of that favorable experience in the program. Just to take a step book. Lets talk about whether it is going to succeed a target rate for each year that we have had to do so. The target rate has not been exceeded. So it has not yet been triggered. So basically the comparison is looking at medicare cost growth rates for the two years prior to the evaluation and two years post evaluation. So they compare today a target which was based on medical cpi. Looking forward it will be based on plus measure. If medicare growth rates are greater than the target rates then i must certify what that savings target is. It must go through a process by which an approach proposal to actually reduce spending would be proposed to do so. In the current tloort was just released we are projects that the it will be triggered in 2021. You actually have to go out and needless to say its on the razors edge. This will get evaluated on an annual basis. So here as a summary, i changd it a little bit we are comparing the growth year. In doing so f you were to average these you would get 2. 14 . This is slightly higher than the target. Looking at the part b premium, the Social Security cost of living adjustment is projected to be 2. 2 this year. In response to that largely in response to that there is the expectation or forecast that the 2018 premium will be expected to remain. Roughly 70 have been held harmless in 2017. There were a large number of people held harmless. It meant that individuals experienced a small increase in Social Security checks. This hold harmless provision specifies that individuals cannot see a net reduction in their Social Security checks due to an increase in the part b premium with either low or no increases in Social Security checks many70 , were affected by that provision. So on average were expecting that these people are paying roughly on average 109 this year. Were expecting that gap between the current amount that these individuals are paying, the 109, and the current premium level of 134 to narrow considerably when there is a more substantial cost of living adjustment that is forecasted for 2018. However, despite receiving a significant cost of living adjustment, many actually most will not actually experience a net increase in their Social Security checks, because they have for the fact theyve benefitted from the hold harmless provision for a number of years now, that gap will be made up largely in 2018 with that cost of living adjustment. So i wanted to end with almost where we started. We started with a comparison of how these programs have changed over a pretty long period of time. We often look at individual trends and individual, you know, rates of change and individual comparisons to what was projected. This is a comparison. I apologize if its difficult to read the bottom there. But basically this is looking at the changing share of part a fee for Service Benefits over time. Starts at 2006 and ends at 2025. A 20 year period. The blue bars represent the largest component of fee for service part a spend iing whichs for inpatient hospital. The orange bars represent nursing facility. The gray is hospice. And the so the inpatient hospital which is obviously and is still the largest share of part a spending or fee for Service Spending has changed quite substantially over a relatively short period of time. Really its attributable to both the growth of Skilled Nursing facility and hospice. But thats not really telling the full story there. I think largely whats driving this phenomenon you could see that what im trying to illustrate here is how do those programs change so dramatically over a long period of time. The answer is that they change really slowly each and every year. And part of whats happening here is that what weve seen over a number of years is that a large number of cases that would have otherwise been inpatient have moved to outpatient. Well see that on the next slide when we look at part b spending. So whats remaining in part a in true Congress Plans<\/a> to do on medicare and medicaid coverage. This is live coverage. Its just getting underway. My name is joe and im in Health Care Retirement<\/a> policy at aei. I will be introducing the panel in just a second. I did want to highlight a few things that the trustees said in their report. Perhaps their biggest concern has to do with the outlook as they said in their summary, a major concern has to do with the growth of Health Care Innovation<\/a> which has positives and negatives. The positive is that with modern technology and modern techniques we are able to address the Serious Health<\/a> conditions of many more people than we have in the past. While most technological advances have tended new the Health Care Landscape<\/a> is shifting. No one knows if it will inkrocre or decrease costs. Let me also sight a critical point that the trustees made in their report having to do with productivity. The Patient Protection<\/a> and Affordable Care<\/a> act or the aca has a provision in it that the Current Administration<\/a> is not taking any actions to remove, which sets payment reductions according to the growth and general productivity it is for this policy to avoid leading to serious erosion in access to care and quality of care. These are very serious issues. Finally, let me site the i like to think of them as the Public Trustees<\/a> in exile and they wrote a paper before they saw the report yesterday but they made a very important point, which is that delaying action on medicare is a fiscal challen challenge. So let me introduce the panel. Our first will be the chief actuary of chief medicaid and Medicare Program<\/a>s to my right. The panel after paul gives his talk the panel will make some comments and well have general discussion and open it up to the audien audience. The next speaker is president of the committee for federal budget. Then theres gene sterling. Then we have bob moffit at Heritage Foundation<\/a> for Health Policy<\/a> studies and then finally keith who is a managing director. He has long experienced other related organizations and so with that please give your presentation. All right. Good morning. Thank you. I always appreciate the opportunity to come and talk about the financial status of medicare after we released the annual Trustees Report<\/a>s. Not in the interest of burying the lead but this years report is not very different than what we have seen in prior years reports. But that is actually a pretty big story that we we have a drastically, a very different the current members of the board of trustees are from have a very different perspective on health care than the Prior Administration<\/a>. The members of the board of trustees are there are three cabinet officials. The secretary of health and human services, the secretary of treasury, the commissioner of Social Security<\/a> and theres also two Public Trustees<\/a>. They do play a very Important Role<\/a> and that has been vacant over the last couple of years as well. But the fact remains that in a shifting administration with very different perspectives towards health care as evidence from the debate on the Current Health<\/a> reform efforts, the fact that the underlying approach, the asufrsumptions, the methods i walk through the key findings are not very different. I think that really is a testament to the current and Prior Administration<\/a> for the role the board of trustees play in these very important programs and that they are free of, you know, political perspective or that they are truly an independent objective of the status of these trust funds. That is a pretty important observation and reality. So ill walk through. It was not triggered this year. Its therefore not getting a significant amount of attention. What has gotten a fair amount of attention has been the part b premium rate. Sh i will do this in a way that you can visualize these are programs that move relatively slowly. Even when they move relatively slowly they can be changes over relatively short periods of time. I like to start my presentations always by putting up this these comparisons. This is comparison of the plit between how the program has evolved and how spending by medicare has changed over time. Each and every year the board of trustees are put out the report that have a 75 year projection. If we were to jump back to just 1976 and look at what the program looked like at that point where this was predominantly an inpatient hospital program, nearly 75 , you know, more than twothirds was for in patient hospital in 1976 as compared to what it looks like today and this thats lot more pieces to that pie. Clearly those the program is a lot more than just in patient hospital. Its also if the pies were bigger they should be much bigger over time. You can see these growing from just under 1 to more than 3. 5 in 2016. Well talk a little bit about continued growth in a little while. But just i would lieng ke to start with this for demonstration. Although it would have been impossible in 1976 to forecast, you know, the construction of that pie it is still actually very important to measure and estimate and evaluate what the anticipated effects are of the current program. A lot of the reasons why this pie looks different is because legislation has changed over time and the program has matured and has evolved and will continue to do so. It will you know, stopping annually and evaluating the current financial status is pretty important process. P one of the reasons why is that this large change in shift towards private plans. This is really looking at Medicare Advantage<\/a>, penetration rates over roughly a 25 year period. You can see that the rate of take up has been growing very steadily and is forecasting it even more so. There are two really separate and distinct benefits within just the medical person of the program. The hi Hospital Insurance<\/a> Program Provides<\/a> in patient hospital care and other, you know, Skilled Nursing<\/a> home hospice care. One reason why its fornt keep the program separate or to evaluate them separately is because the financing is extremely different between the two. What gets the most attention is data depletion of that trust fund. Well talk about it in a little bit those are financed general and beneficiary premiums. Those are set on an annual basis so they are always in financial ballots. When evaluating the status of those programs its more important, the fact they are always in financial balance means its important to consider the other impacts of such spe spending. So the foundation starts with the new experience. This is comparison of the expectation of 2016 medicare experience between the 2017 report and the 2016 report. It is pretty remarkable. The fangt that expenditures were, you know, 1. 7 billion lower than expected, still good news. On part b side we are almost exactly aligned generally more experience after years a couple of years of higher costs associated with in particular specialty drugs most notably those that treat hepatitis c. So this looks at the income and expenditures. It kind of builts builds up e payroll taxes. They are expected to be 2. 9 of payroll of income. There is additional amount paid in highincome earners, those incomes over 200,000 or 250,000. Building up there are some state transfers and drug fees that go into part d. The gap there is the deficit. That is the amount of expected expenditures that programs would be making most notably by hi after and deficit reflects the gap between those spending from current sources of revenue versus what would be available in the trust fund. So thats the deficit that would be in order to pay full benefits if all asufrpsumptions are real. Well talk more about that. So it has to evaluate the funds. The fact that there are annual part b and part d. No, sir long term sol van si issues. Well also note and there are some potential aspects that might prove mobmatic to maintain into the future. These are 75 year projections. The expectation is it might have to be reductions an access to care or quality of care or some other changes that would account for that gap. For physician updates, it was passed two years ago specifies all price updates for physicians in all future years. So theres a transition period until we get to the point where either physicians are in these events i lost where are we at . Alternative pay method thank you for that. Or in the merit based incentive system. Those rates are specified and will be constant of whether underlying costs for Physician Services<\/a> are at a faster rate. We anticipate it is closer to 2. 2 . So that gap between what we think underlying physician costs are growing at versus what the payment rates will be updated by will become a concern over time we have concerned they could prove to be properblematic. The trustees have presented an election and current law that to the extent they do not continue into the future. So there is the transitions, the transition that would be experienced into the sector. They are transitioned and basically and the independent payment Advisory Board<\/a> are not implemented. You can see that a trust fund ratio to the percentage of annual expenditures, the objective is that the short range objective goal is to achieve 100 for all years. You can see that we are clearly below that level today and we are projected to actually become depleted in 2029. You can see the general shape of that curve hasnt changed much but the fact that we did get some experience most notably lowered expenditured. It is for the lengthening you can summarize and it looks at the present value of income rate. So all of the dollars going into the program. All of the dollars going out for benefits and other expenses compared to taxable payroll. You can see income rates really changes very much from year to year. You can see that theres was a slight improvement. As a result the balance has improved. There is less of a deficit this year. So effectively this deficit of. 64 means that if that the current payroll taxes, if those were increased it would be in financial over 75 years. So often it is more interesting when there are bigger changes. You can see this is basically just the walk through of the 2016 report and 2017 report. You can see that the largest contribute to here is the hospital assumptions, so the. 8 . So here is the annual representation of whats happening on the income and the cost rate. A couple things to note here. You can see that basically theres a line that drops from the cost rate down to the income rate. It really represents that when assets are depleted the only amounts of funds that will be available are the amounts coming into the fund. So in 2029 it would provide benefits. You can see the ratios are over time. You can also see the cost rate kind of gets closer to the income rate over time and then kind of stays level there. It is partly again due to some of those productivity offsets. The next slide will throw sorry. This one first compares the cost rates from year to year. This one adds in what those cost rates would look like. You can see that those productivity offsets, which are roughly, you know, 1. 1 as compared to what we think could be achievable in the Health Sector<\/a> starts off if you only look through 2027 or look through 2040 those gaps are not very large. You can see as you compound out these differences over time in particular over 75 years, those differences get very different. You can see that that cost rate, while it is currently in the 5 range would max out in excess of 8 under that alternative. It highlights what the importance of providing those alternative pro jekss. Projections. As i mentioned on part b in particular, the rates are financed adequately. You always see that the income is going to be very close to what we project for expenditures. So in terms of evaluating financial status, what you can see is that the 2017 is slightly higher than it was for the 2016 report. Its a little more to the story here in part d. There was a notable reduction in anticipated spending in 2016 for on behalf of with respect to hepatitis c related drugs and there was also a significant increase amount of manufacturer rebates coming into the program. These two factors contribute to a significant decrease in the expected expenditures for the Part D Program<\/a>. This was actually a pretty significant change in what we were experiencing in part d. This summarizes b and d together. You can see under current law we are currently at something a little excess of 2 of total expenditures. Thats expected to grow to a little less than 4 by the end of the projection period. You know, this is another way to look at what was summarized previously. Not much change as a percent of gdp. In 2090 there was part b is slightly higher. And again, the comparison shows that this years report is slightly higher. This one looks at medicare expenditures in total. Again, comparing that current how and it demonstrates that even though when we are looking at under a current law basis a part a program that has a deficit issue, you know, it was expected to be depleted in, you know, roughly 12 years time. To the extent that current law provisions are not implemented and show a large increase of those programs as a share of other relative measures, those potential troubling results could actually be a lot worse to the extent that current law provisions are not able to be implemented. Under drew law expenditures expected to grow to 5 . So the independent payment advisory report has gotten a fair amount of attention. It is expected to be triggered in the 2017 report. It did not happen this year in part because of some of that favorable experience in the program. Just to take a step book. Lets talk about whether it is going to succeed a target rate for each year that we have had to do so. The target rate has not been exceeded. So it has not yet been triggered. So basically the comparison is looking at medicare cost growth rates for the two years prior to the evaluation and two years post evaluation. So they compare today a target which was based on medical cpi. Looking forward it will be based on plus measure. If medicare growth rates are greater than the target rates then i must certify what that savings target is. It must go through a process by which an approach proposal to actually reduce spending would be proposed to do so. In the current tloort was just released we are projects that the it will be triggered in 2021. You actually have to go out and needless to say its on the razors edge. This will get evaluated on an annual basis. So here as a summary, i changd it a little bit we are comparing the growth year. In doing so f you were to average these you would get 2. 14 . This is slightly higher than the target. Looking at the part b premium, the Social Security<\/a> cost of living adjustment is projected to be 2. 2 this year. In response to that largely in response to that there is the expectation or forecast that the 2018 premium will be expected to remain. Roughly 70 have been held harmless in 2017. There were a large number of people held harmless. It meant that individuals experienced a small increase in Social Security<\/a> checks. This hold harmless provision specifies that individuals cannot see a net reduction in their Social Security<\/a> checks due to an increase in the part b premium with either low or no increases in Social Security<\/a> checks many70 , were affected by that provision. So on average were expecting that these people are paying roughly on average 109 this year. Were expecting that gap between the current amount that these individuals are paying, the 109, and the current premium level of 134 to narrow considerably when there is a more substantial cost of living adjustment that is forecasted for 2018. However, despite receiving a significant cost of living adjustment, many actually most will not actually experience a net increase in their Social Security<\/a> checks, because they have for the fact theyve benefitted from the hold harmless provision for a number of years now, that gap will be made up largely in 2018 with that cost of living adjustment. So i wanted to end with almost where we started. We started with a comparison of how these programs have changed over a pretty long period of time. We often look at individual trends and individual, you know, rates of change and individual comparisons to what was projected. This is a comparison. I apologize if its difficult to read the bottom there. But basically this is looking at the changing share of part a fee for Service Benefits<\/a> over time. Starts at 2006 and ends at 2025. A 20 year period. The blue bars represent the largest component of fee for service part a spend iing whichs for inpatient hospital. The orange bars represent nursing facility. The gray is hospice. And the so the inpatient hospital which is obviously and is still the largest share of part a spending or fee for Service Spending<\/a> has changed quite substantially over a relatively short period of time. Really its attributable to both the growth of Skilled Nursing<\/a> facility and hospice. But thats not really telling the full story there. I think largely whats driving this phenomenon you could see that what im trying to illustrate here is how do those programs change so dramatically over a long period of time. The answer is that they change really slowly each and every year. And part of whats happening here is that what weve seen over a number of years is that a large number of cases that would have otherwise been inpatient have moved to outpatient. Well see that on the next slide when we look at part b spending. So whats remaining in part a in true Inpatient Experience<\/a> is the more severe cases, those cases that could not be treated in an outpatient setting. Whats remain rg the shares of care that are more likely to result in a afterwards. You can see that shift over time. You have the aging of the population and some shifts in policy towards the increased hospice care over time. But i think largely what were seeing here is that shift from inpatient to outpatient. We turn to part b. See a similar comparison here. Again, looking the blue bars are physician, orange is out patient, gray is medical equipment and the yellow is all other. You could see that the largest share ten years ago was physician. Thats no longer the case. The largest share of part b fee for service or its not longer the case in the forecast when we get to 2026. That there is a large and growing share thats attributable to outpatient claims. We think that shift is going to continue. You could actually start to see some of the effects of some of those payment rate updates on the physician side toward the end of this particular protection. A little more subtle on the dme side. You can see there was a pretty sizable reduction from 7 to 4 or 3 over time which shows the effect of some of those Competitive Bidding<\/a> programs that have been implemented around durable medical equipment. Ill take your opinion on how interesting this is is different than mine. How interesting those might be, if we look at part d and this is my last slide. The differences here are pretty striking. This is comparing the blue bars are direct subsidy, the orange bars are reinsurance, federal spending for basically catastrophic claims. What this shows is that in 2006 almost three quarters of the benefit were direct subsidy spending. Direct subsidy spending is the ill call it the value thats attributable to the general part d benefit. The benefit is split into several different phases. In the end in the catastrophic phase after an individual hits their outofpocket limit, the benefit changes significantly. And the funding of it changes very significantly. 80 of catastrophic spending is funded by medicare, you know, directly. As compared to the standard benefit is funded 75 through the plan and 25 is beneficiary cautionary. So how this benefit has changed so significantly over such a short period of time really demonstrates how the changing landscape of Prescription Drug<\/a>s in particular Prescription Drug<\/a> pricing has changed over time. People are getting similar amounts of drugs that they always have. Whats changed is that the vast majority of the most common drugs are now generics. Those generics are relatively low priced. So theres been a decrease in that aspect of the benefit. Where theres been significant increases is on the higher cost drugs, on the specialty drugs, most notably over the last several years around hepatitis c drugs. Theres significant costs associated with those. What were seeing is there are relatively few people generating a large portion of those ultimate spending. What this means in terms of impact and potential impacts for policy is that there is just the broad value that individuals were receiving in the Part D Program<\/a> has shifted where many were getting, you know, very good value out of that coverage, to the extent that the value is now centered towards those that are just using these high cost drugs is something that policy makers really need to be aware of and take seriously and take into consideration. I know med pack has done some work on here and has some recommendations as to what and should be done around this. This is an interesting way to kind of look at the changing market around Prescription Drug<\/a> benefits. Okay. Thank you, paul. That last slide, one of the other aspects that you diplomat mention was the change in policy, though, to close the socalled donut hole, which also i mean, you could see that step function. Its not solely pricing. Its also policy thats driving part of that. Somewhat. There wasnt a huge change in the number of people getting to catastrophic coverage in response to that. If anything, that would have dampened the effect that there might have been more people getting more coverage, more value throughout the benefit. And the fact that weve seen that catastrophic continue to increase as a share i think the issue remains. But, yes, the closing of the coverage gap certainly provides more coverage to more people earlier in the benefit phase, but not sufficient enough to actually offset the effects of those high cost drugs. Okay. So maya, take it away. Thank you. Thanks, joe. That was a really good presentation. There was so much information in there and great over view of really complex topics. Ill Say Something<\/a> i was saying before we came here, which is i really encourage people to read the Trustees Report<\/a>s. Its a time with policy making where we are losing touch with the numbers and facts as good starting points. Things like documents from the Congressional Budget Office<\/a> are so informative. This is one of the ways i started to learn about Social Security<\/a> and medicare, was reading these reports every year. I know it doesnt sound like a lot of fun, but you learn a lot. Theyre great and impartial and very useful. Im going to take a step back and take about health care in the overall fiscal situation were facing and a little bit about the environment for dealing with these things. Our overall fiscal path in this country is on an unsustainable path. Our debt relative to the economy is the highest it has been since world war ii and the difference is that after world war ii it quickly came down and came back closer to historical averages, where we are on track with a debt relative to the economy will be growing indefinitely faster than the economy. That is unsustainable. That is undermining of any healthy economy. In many ways i think it kind of reflects a broken political system where we no longer are really willing to confront and tackle these very difficult challenges that require hard choices. So if we do nothing right now the debt which is 77 of gdp is on track to go up to about 91 of gdp ten years from now. Again, making no policy changes, well borrow 11 trillion over the next ten years. Kind of hard to picture what 11 trillion is, but suffice to say thats too much money to have a plan that thats what were going to be borrowing over the next ten years. So the key is how are we going to get a hold of these problems. Really the Biggest Issue<\/a> in all of this is health care. The Health Care Costs<\/a> are the single biggest challenge because they so are the drivers of the growth of the debt along with the ages of the population and because its really complicated. When it comes to social, which is the Biggest Program<\/a> desperately in need of reforms as is medicare, we kind of know how to do it. Theres about five variables we can make changes to. I remember when i was in graduate school, i went to graduate school to focus on budget deficits. Right when i was there they got the deficit under control. Lo and behold you study a little bit more these longterm challenges from Social Security<\/a> and medicare are still looming out there. I spent two years in Public Policy<\/a> school and i quickly decided i was going to become an expert in Social Security<\/a> because it was so easy to fix and i was going to leave the hard ones to other people. We dont know all of the policy solutions. I think thats why its even more important to get started putting in place reforms to control costs as quickly as possibility. Were going to continue to try to see what works, figure out whats working best either in the states or in pilot programs and implement more of those changes. Medicare is a huge key to all of this. Its the second Largest Program<\/a> in the federal budget. Its about 15 of the budget and it is one of the Fastest Growing<\/a> programs. Over the next ten years its going to account for about 30 of the programmatic growth in the budget. Over the longterm Health Care Costs<\/a> pretty much account for all of the noninterest growth in the budget. Interest is actually the Fastest Growing<\/a> part in the budget right now. But Health Care Costs<\/a> account for pretty much all of the longterm growth. Medicare is about 80 of that. Theres no question that what we need to be doing is focusing on reforms. Every year when the trustees come out with their reports, they warn us you do need to make reforms. The sooner you make them, the easier they are to make. There is absolutely no reason to put them off other than a political perspective that its hard. To talk for just a minute about the political environment, i think one of the troubling things is that right now really the willingness to confront hard choices between and including with both parties seems to be at the worst point its ever been. I feel like i say that every year, but it then proceeds to get worse. It is the worst point every year but then the next year it is worse. This is a terrible moment where the partisanship is so deep, so high and the way both parties are competing is saying im not going to do a single hard thing. We have a president who ran on saying im not going to touch Social Security<\/a> and medicare, made promises not to touch those programs. If theres anything we know, you do have to make reforms to them. It is perfectly legitimate to have very deep differences of opinion about what changes to make to fix those programs, but the notion you dont have to make changes to them is just not rooted in any policy reality and it really jeopardizes the programs for the people who depend on them. I think in the Health Care Debate<\/a> its been much more of a political debate than a policy debate. I sort of think starting at First Principles<\/a> of were going to repeal and replace obamacare. And i dont have an opinion on whether we should or shouldnt. The first question is what are we trying to solve . I think most involved in this couldnt even tell you. One i believe we should be spending more attention on is how are we going to control overall Health Care Costs<\/a>. Thats different than saying youre going to pay less for health care. Its creating a structure for a saint marys that will do more to incentivize controlling Health Care Costs<\/a> than what we currently have. We didnt think there was enough of a discussion when we created obamacare and theres definitely not enough of a discussion in talks to replace it. Given the scope of health care in our budget, how that undermines potential for Economic Growth<\/a> in our economy at a time when we really need it, it should be front and center more than it is. Ill just touch upon a couple of areas i would like the health care and medicare debate to be talking more about. I think the key is going to be looking at a couple factors. The first one is Delivery System<\/a> reforms, doing more for how we deliver health care in terms of creating payments for quality of Health Care Payments<\/a> for outcome rather than what is provided. So bundled payments is a kind of option. Accountable health care, organizations figuring out whats working there, figuring out what we can do more of. It really is creating different structures in the Delivery System<\/a>. The second part is certainly incentives within the Health Care System<\/a>. We are still very much too removed from the overall costs or prices of health care, so there arent the right incentives aligned. Insurance is always a complicating factor in that. There is a very Critical Role<\/a> for insurance in terms of insuring people against excessively onerous Health Care Costs<\/a>. But at the same time you dont want to insulate people from the price completely. There are things like first dollar coverage which can undermine price sensitivity. You probably want to limit supplemental insurance. Hsas can be used in different ways. And i think transparency in pricing. This is so long over due in our Health Care System<\/a> but figuring out more transparency is a critical component of this. Tort reform so that we do more so theres not excessive presentative providing of health care to avoid lawsuits but that its more about health. And finally the tax treatment of health care. We subsidize Health Insurance<\/a> through the tax code, through the health care exclusion in a way that economists on all sides of the aisle agree is inefficient and drives up the cost of health care. That would be a great policy to look at to limit the health care exclusi exclusion. Its one of those rare twofers right now in policy where it would be a good tax policy and Good Health Care<\/a> policy. It would also be good fiscal policy. Im always wary of whenever people Say Something<\/a> is a winwin. It usually means theyre trying to sell you something for free. But i think looking at the health care exclusion could in fact be a winwin. The details are so important. And the big picture is also so important, which is we are on an unsustainable path. We have a political system that is utterly unwilling to come to terms with that and put forth any real policy solutions that will grapple with that. And the biggest key in all of those policies is going to be health care reform. As we are fighting it out, i just think the quality of the discussion around the Health Care Debate<\/a> in the past months has been terrible. It has been a disservice to anybody whos trying to understand Health Care Policy<\/a> and think about what is true, that there are tradeoffs in things and we have to figure out how much we want to subsidize a variety of Different Things<\/a> and who should do the subsidizing. Were not having this discussion in a realistic way at all. Thats really the first step for starting to come up with some smart policies to tackle these admittedly difficult but critically important challenges. So again theres so much great data in here. Theres so much stuff to play with in these Trustees Report<\/a>s. Thanks for the presentation. Thanks maya. Very good points. I mean its certainly the case that most of the sturm and drang have nothing to do with these programs in the United States<\/a> or at least the one that has the most leverage this is medicarwh care. While its certainly true that private Health Care Delivery<\/a> and the Medicare Program<\/a> have great influence, the reality is a lot of what medicare does in terms of its regulations and procedures shape a lot of what goes on in the whole rest of the health system. Your points are highly relevant to this discussion. Gene, please. Thank you, joe. Im honored to be on this panel. Ive known everybody on this panel for a while. Let me also add to mayas compliments on the work of the actuaries, its not just the Trustees Report<\/a>. We have certain offices in this town that are highly informative, extremely professional and have a great deal of integrity. They include the actuarys office. They include offices like cbo, Government Accountability<\/a> office. I think its extraordinarily important that not only we maintain these offices but really restrengthen them. They are the sources of information we need to help the public sort out its own decisions. So thank you, paul. Id also like to thank aei. Actually ive done a number of these panels before, not one recently. Something im going to present today is something i did for aei more years ago. I want to concentrate a bit on the relationship or health to Everything Else<\/a> thats going on. In some sense its correlated with what i already presented. In that sense, im reminded a bit of some of the announcements that used to be made in church and synagogue bulletins. They were correct but they give you a slightly different focus depending on hour you think about them. For instance one of them was please put your contribution in the collection basket along with the person youd like remembered. Another one was the bulletin said that margaret saying i would not pass this way again much to the delight of the congregation. And another one was the youth will be performing hamlet today in the basement. Please come early and watch this tragedy unfold. In some ways im going to be taking some of the data ive got on medicare. Its actually going to be some of the same emphasis that maya did. But to argue that you really cant talk about medicare in isolation. Maybe theres a fire on the street and your roof is caving in but you just cant focus on fixing the roof. Youve really got to worry about the system. Its also partly because in the budget we make allocative decisions. So you have to think about what we want to do in medicare with regard to how we allocate everything. Let me jump quickly to my slides. Basically theyre going to make four points in these slides. One that health recently ive been doing a lot of work not just on how much of the budget is in health care or how much National Health<\/a> care spending is on health care, but the increments of the growth we have in the economy and the growth we have in Government Spending<\/a>. Where is that going . Because those increments are usually where we make most of our marginal decisions. We usually tend to do some of the same things over and again. But its the increments, its the growth that we allocate. As you might guess, health dominates the growth in federal spending and medicare is the flag ship there. My second point is if you look at health and Social Security<\/a> together, the growth in health and Social Security<\/a> medicare of about a trillion dollars fenn ye ten years from now basically is in excess of all the growth in revenues that were expecting even if we dont have a tax cut. The third one is that generationally were giving youth a lot, but only when you retire. So were asking you to pay a lot more for your higher education. Were going to cut back on your support as workers. Were going to support your children less. Dont worry, dourn twn the roade going to give you a lot more in Social Security<\/a> and medicare. Im not sure if thats the bargain you want. The second thing is health care is totally dominating the Income Growth<\/a> in the economy and its distorting our sense of even whats happening there, Income Distribution<\/a> and all other sorts of things. Now ive got to quickly go through these slides. This first slide shows you the growth in all the noninterest outlays of the government. This is a year old because i dont have all the updates yet. But this is cbos estimate of where the real growth in spending takes place. Cbo measures nominal growth. Real growth in spending here is about a trillion dollars. If that real growth in spending in 2026 versus 2016, 38 of it goes for medicare. Medicare by itself would absorb close to 40 of all the growth in spending for everything other than interest on the debt. And then if i add in other Health Care Spending<\/a> increases, it goes to 55 or so. By the way, this confirms something joe mentioned a minute ago. Were having this big debate other aca and not on things like medicare. If you look closely at the numbers, the aca expansions are causing a growth in spending of about 8 . Medicares got 38 . If you take medicaid before we had the aca, thats got about 10 . That just gives you a relative standing of how these issues stack up and how medicares dominating the growth in federal spending. This slide shows you medicare plus Social Security<\/a>. The second bar there is Social Security<\/a>, medicare and other health. You could see that the total increase in spending there this is an updated number because i did have some new cbo numbers. The total growth in spending 2017 to 2027, about a trillion dollars more were supposed to spend on these programs. Thats in excess of the additional revenues that were expected to get. After we spent the Revenue Growth<\/a> on this growth, weve still got to cover all this growth and the net interest on the debt. Everything else in the budget is essentially getting zero. Thats mainly the discretionary defense spending. Thats what our current bujts s budget says we will do. The average couple today the 2015 set of numbers ends up to be the fifth column in this chart. Says that we give about a Million Dollars<\/a> in Social Security<\/a> and medicare benefits to an average income couple retiring today. Thats what theyd need in a 401 k account earning a modest real Interest Rate<\/a> to be able to pay for their benefits on average. For you millennials, 2 million. Were going to double that. By the way, this has nothing to do with the decline in the birthrate. This is the builtin growth. Were going to give you more and more years of benefits in both Social Security<\/a> and medicare. Within Social Security<\/a> its also wage index. If your wages are 30 higher than ours are, youre going to get 30 higher in annual benefits. Were doing this instead of Everything Else<\/a>. Basically this simple graph on an individual basis pretty much summarizes where all the growth in Government Spending<\/a> is going, although it doesnt have the medicaid in there. Finally the final graph that i mentioned is if you look at the blue bar here, this is a very crude measure of something people call excess cost growth. Its sort of this notion, well, lets measure the growth in Health Care Costs<\/a> in excess of growth in gdp. I did it on a per capita basis. Whats the growth in per Capita Health<\/a> costs relative to per capita growth in gdp. All the little blue lines down here says the growth is maybe a little less than 2 . Theres this debate about whether it stopped or started or anything else like that. Ive been proposing for some time now thats actually the wrong way to measure whats happening with health cost growth, not only measure but predict it or at least project it. What i calculate is whats the growth in income thats the share of Income Growth<\/a> per capita thats going to growth in Health Spending<\/a> per can that. Those are the yellow lines, which says that for every dollar of increased income weve had in this economy, about 32 from 1990 to 2007 has gone for health care. If you take the period from twer2007 to 2017, health has about 60 of all the Income Growth<\/a>. If you take the cms projections going out into the future we never know what to call that because were not really forecasting. But you still get a number of about 50 . Part of that is because the Income Growth<\/a> in the economy is projected to be low. This measure tells you that even when people complain about whats happening to your wages, compensation, other issues, its health care thats a huge part of the story. People often dont count that as part of their Income Growth<\/a> and it distorts all those debates as well. Those are all the slides that i wanted to do. Again, i just want to return to this notion that medicare is in many ways the flag ship of much of what youre seeing here. You have to address the flag ship. One of the big debates right now in the Affordable Care<\/a> act is should payments in medicaid to states grow at the rate of general Price Inflation<\/a>, or should it grow at the rate of medical Price Inflation<\/a> . In point of fact, if we keep medical Price Inflation<\/a> continuing as the Current System<\/a> does at this rate and add onto that the new services we get, its an unsustainable path. To think were going to solve this just by looking at medicaid and demanding that the state make an adjustment doesnt make sense. Youve got to deal with the system in a much broader sense. In that sense the place in terms of government you have to look is medicare. It is the flag ship. Thank you. Thank you, gene. Your last comment brings to mind a well known fact, the dp comparison between the u. S. Health system and most european systems, we spend a lot more than europeans do. I wont get into the details of whether were getting value for it. Theres some debate about that. But whats the big difference in the spending . Its not utilization. Its prices. So that enhances the point of this chart, that it really is prices thats driving it. If it were utilization, we might have a different view of this. Were just spending more money. Bob . Thank you very much. First of all, i want to add my positive comments to those of my colleagues concerning the performance of the office of the actuary of the Medicare Program<\/a>. Ill say publicly what weve said privately to each other. In terms of fairness, in terms of making sure that they dont put their fingers on the scales of justice when theyre evaluating matters, they have been absolutely first rate, professional and have done a fantastic job and have really shown what it is to be public servants. Id also reaffirm mayas point about the incredible value of the annual Medicare Trustees<\/a> report. It is a mine, a rich mine of great information, statistical data and analysis that you can use throughout the year. Certainly many of us in the policy Community Use<\/a> it. I do wish as maya pointed out, i do wish that members of congress would actually pay a little bit more attention to this. I do have a couple of process points id like to make before i get into the substance of this conversation. You know, this year this report is signed only by administration officials. The two Public Trustees<\/a> positions are vacant. This was true last year. So what that really means is as good as this report is, it means we dont have any independent assessment of the financial status of the Medicare Program<\/a> outside of government officials. I think that is a problem. And i think it is a problem that both the president and the senate have got to start to deal with rather quickly. We cant have this next year. This says nothing about the integrity of the report. But the fact of the matter is if you want to build Public Confidence<\/a> in a report, you do want Public Trustees<\/a>. The second issue, again, its a process issue, but i cant ignore it. And that is theres a law on the books that says that the Trustees Report<\/a> is to be delivered on april 1st of every year. It is now july. And this is becoming a problem. This is a law. This is not a good idea. Its not a suggestion. Its not, you know, something that somebody can get around to at some point. What this really means is we have a law that is not functioning in this respect and if the law is not functioning, weve got to repeal or change it. Theres a lot of things we could do. Its possible that frankly given the scope of the work that the trustees have to perform, that they actually cant do it in the time a lotted to them. I think what we have to do is congress has got to look at this and say, well, is there a better way of doing this. My suggestion would be that they submit the report when the president s budget is submitted so congress will have a chance to deliberate on this and make some decisions, especially if they have to make those decisions based on excess dependence on general revenues, which the trustees say this year they have made the determination that is the case. So were going to have the insolvency date at 2029. Last year it was 2028. Thats no big whoop. The fact of the matter is the Medicare Trust<\/a> fund has been facing insolvency since i was able to read. I dont understand why the press puts the greatest emphasis on this issue of trust fund insolvency. The trust Fund Language<\/a> surrounding this in the general media sometimes is really disturbing. They say, well, were faced with bankruptcy. Its all scary language. But the truth of the matter is over the last 51 years the trust fund has never gone into insolvency and its likely it never will. There is another problem, however. That is that the difficulties with the trust fund, you know, that the trustees say in effect a shortterm evaluation shows that this is not on a sound financial basis, either shortterm or longterm. Theyre right. That gets down to Political Leadership<\/a>. Maya has mentioned this. Ill repeat it. We have a real problem. Im talking about a Major Political<\/a> problem, a problem of governance. That is the Political Leadership<\/a> in this country, republicans and democrats alike, are not willing to deal responsibly with some of the most important domestic policies facing this country, primarily the management of the fisks deficit spending, these issues. President trump promised during the campaign that he would not touch medicare. The president seems hell bent on keeping his promises. Of course his first budget indicated that he was not going to touch medicare at all. The paradox that we have here today is were discussing a report signed by three cabinet secretaries who say exactly the opposite, whose sentiments are exactly the opposite. Page nine of the report reads, quote, financial projections in this report indicate a need for substantial steps to address medicares remaining financial challenges. It goes on to say, the trustees recommend that the congress and executive branch work closely together with a sense of urgency to address the depletion of the h. I. Trust fund and the projected growth in h. I. And smi expenditures. Well, theyre absolutely correct. I think the president needs to have a conversation with his appointees about the responsibilities they exercise as trustees of the Medicare Trust<\/a> fund. At some point, of course, there will be a day of reckoning. And the question of what we do with the h. I. Trust fund is going to come due. I mean, were either going to raise taxes or were going to cut benefits in Medicare Part<\/a> a program. I would just mention for context that we have already scheduled over the next ten years about 802 billion worth of payment reductions in medicare under the Affordable Care<\/a> act. Its a lot of money. Thats a big, big cut. You know, who knows, citizens could die. But the point is that is on the table right now. In any event, gene makes a vitally important point, which is something that has to be constantly that we have to keep in mind. That is the cultural environment in which we live is what Robert Samuelson<\/a> once called the age of entitlement. Government is becoming increasingly a mechanism where we transfer money from large classes of americans who mostly work to other classes of americans, mostly those who dont or cant work based on various formulas of eligibility. The bottom line is that middle class entitlements are starting to crowd out other budgetary priorities. We cannot allow this to continue unless we are prepared to come face to face with a fiscal crisis. We are not going to, the trustees tell us, were not going to face the ipad machine this year. Its kind of like the doomsday machine in Health Policy<\/a>, that if in fact Health Care Spending<\/a> effective in 2028, if Health Care Spending<\/a> exceeds the Gross Domestic Product<\/a> plus 1 the independent payment Advisory Board<\/a>, which doesnt exist right now in reality, would recommend across the board or various times of medicare payment reductions. In the environment which were operating right now, where we already have scheduled 802 billion worth of payment reductions. And under the alternative scenario of the trustees, theyre saying this could jeopardize access to care in the future. This means were going to have to make some very big discussions very soon. Weve got to get serious. We need our Political Leadership<\/a> to engage in Public Education<\/a>. Americans love medicare, absolutely love it. Surveys show most americans are clueless about how medicare is financed, how much it costs, how it operates in practice. Its a pay as you go system. Genes work in this area is pretty important, because there is a deeply held belief by a very large number of Senior Citizens<\/a> that there are somehow other financing Medicare Coverage<\/a> theyre getting today based on the vague notion that the taxes they paid in their working life are paying for those benefits. This is a denial of reality. Its a very very common perception. If it were not so widespread, the fact that it is so widespread is a very serious problem. I know that on a personal level when im talking with even friends and relatives, people are loathe to admit the truth, that in fact, no, they are not paying for their benefits. Medicare premiums pay only a small percentage of the total medicare benefit cost. There is one thing i want to bring to your attention on the Trustees Report<\/a> before i turn it over to keith. That is on page 20 of the report, theres a discussion of Medicare Advantage<\/a> growth. I think this is very significant. Last year the trustees said that medicare enrollment is steadily growing and will exceed 35 of total medicare by 2025. On page 20 of the report, the trustees now say that medicare enrollment will hit 36 . Medicare advantage is growing a lot faster than a lot of other folks would have ever projected. Recognize the fact that since 2010 Medicare Advantage<\/a> payments have been cut by about 12 . The medicare market is very stable. The number of plans that are participating has been growing. There has been very little interruption. The Patient Satisfaction<\/a> is enormous. And the thing that characterizes it more than anything else is that this is basically a defined contribution system. I dont think the formula that governs the payment is particularly good, but nevertheless, it is. I think that looking at Medicare Advantage<\/a> for the future may give us lessons for how we can introduce some intense competition into the medicare system based on something that is happening already. In fact, it may very well be that reality once again is o outrunning the politicians. And we are going to see an evolution of a system that is more and more private over time than we have in the past. Once again, congratulations the trustees for producing a wonderful report. Paul, thank you for the very, very fine presentation and summary of it. Thank you. I want to go back to something you said earlier in your remarks. Apparently you dont believe in the miracle of compound, interest, is that right . We use the language especially in government to sell a program and sometimes to make a point. And we can credit fdr with the insight back in the depths of the depression that if youre going to create some greater sense of ease in a very troubled country, that you need to use the right kind of language. So when they created the Social Security<\/a> system, they invented the term trust fund. Pauls going to say theres a trust fund, but a realist would say theres no trust fund. The money is collected. It goes into general revenues. The trust fund is an accounting concept. Its not a budget concept. But this is part of the problem and this is one of the reasons why people think theyve already paid for it. Well, dont i have an account . I have a number, right . I certainly have a number for Social Security<\/a>. I think people are less clear whether theres an account number which turns out to be the same number for medicare. Nonetheless they think they have an account. They think theyve paid into it for their entire working lives. So therefore surely ive paid for it. Statistics have shown for the last 50 years or so thats not really true. Keith, take it away. Segue there, joe. Let me start by saying that, you know, just to associate myself with everybodys remarks about paul and his team. I had the distinct pleasure of working with paul, his predecessor for many years when i was in government. I cannot tell you how hard these people work. On top of the quality and the analytics, theyre deeply involved in running and managing the Medicare Program<\/a>. Its one of the hardest offices in government. Theyre weekends, evenings and nights and they churn enormous amounts of high quality information. I think genes points there about the value of institutions like cbo, the office of the actuary here, the office of the actuary at ssa, theyre absolutely critical to what we need. I cannot tell you how much value i think they add. Let me make a couple of points. The hard thing about coming last is so many of the good points have been made. Ill associate myself with some, hopefully correct one or two others. The first thing i would say is one of the biggest pieces of news in this report which weve kind of gone right past is that the most of the analysts in the private sector had been predicting this would happen. First, a president said im not going to cut medicare would have to propose cuts to medicare. Remember, under the law it doesnt matter whether the board exists or not. If the board fails to report, then the duty to report falls to the secretary. Secretary has to make proposals if Congress Fails<\/a> to act, they get put into place. That whole mechanism would have played out and could still play out next year or the year after in a way for a president who likes to negotiate could give him a certain amount of leg nating lench, if you will. I fully expected joe to open this meeting with Something Like<\/a> paul where is the ipab body buried. He didnt. But we did have an opportunity to talk with paul beforehand. This needs to my second point. The most stunning thing to me here is if you look at pauls chart on per capita growth rates, its under 1 per capita. I always get worried doing math with guys who have phds in math. I had my son helping last night. That is really remarkable, public scho absolutely stunning this year it was only. 4 per capita. Thats largely due to inpatient cost declines, but other factors as well. Thats my sort of second point here, is there has been a lot of debate about whether the forgot is responsible or not and all those kinds of things. But the fact is some 2011 to 2017 to see per capita growth rates under 1 in medicare, like bob ive grown up 30 some odd years around this system looking at insolvency around the corner, thats pretty stunning. Something is going on. We do not really know what, but it is a salutory thing. I agree with everybodys comments about not focusing on the insolvency date as the be all, end all of things. I would say one thing to joe about trust funds. A trust fund in a government concept is not the same as a trust fund in a private concept because the assets are not set aside and reserved in the same way. All this is part and parcel of what the government does. However, it has functioned extraordinarily well in many ways as a fiscal disciplining device within the public context. So when we got up to in 1983 the Social Security<\/a> system was going bankrupt and people had to do something. There is a gun to everybodys collective head. And they tried to deal with both the shortterm and the longterm problem and they did it by building in small and incremental changes over time such as the increases in the retirement age that are now in play. My point here is that the trust fund things do matter in a way. Thats where medicare becomes particularly complicated because part of it is a trust fund, part of it is not. Dont obsess about that date, its not the concept of a trust fund is not important in the public concept. It is. Second is dont obsess as much about the longterm either. I think paul would agree with me that its more for what it tells you about the dynamics and trends in the system. For example, the problems he points out with potential risks from proactivity growth over the longterm. If i can segue here for just a second, i will tell you one thing that none of the bills on the repeal and replace or whatever you want to call it this week on the hill, none of these bills would touch the productivity adjustments in medicare. So theyre repealing and replacing segments. Theyre not doing anything with respect to the kinds of issues that bob is raising about the productivity adjustments that are scheduled. So the longterm is important but its important i think my take away from this is good news in some ways, in the shortterm, sobering news in the longterm. But let me get to my im going to join my colleagues here on the soap box and say, you know, you cant really just think about medicare in isolation. You have to look at the whole budget picture. And clearly where congress is in my mind is not focused on that picture. In fact, i would say the debt issue is a serious issue and it is a difficult one for a democracy. Our history of a democracy has been one of struggling how to manage money from the articles of confederation through the antideficiency statutes, if budget statutes. Its all about trying to figure out as a democracy how to manage money. This is part of that problem. I would say the one thing that people forget about the 80s and the 90s is that they were borne of a bipartisan consensus that what was good for the country was shared pain. I think bob is the guy thats going to have the answer to this as the political scientist amongst us. But i think he is dead on that what weve got to have is weve got to have some people who say, look, weve got to care about what were doing for our country. Medicare plays a role in that as do, i would say, taxes, other spending and Everything Else<\/a>. It all has to be on the table and we have to figure out what the right balance is to deal with the central issue of our time. And the central issue of our time is the aging of our population, you know, the declines in fertility rates means we are getting older and were going to continue to get older. That has phenomenal implications not just for health care but for everything that goes on in this country. One of those issues part and parcel to that would be immigration reform. Now, its far afield from medicare. But if youre going to really deal with this problem and the way maya has framed this, i think all of that kind of thing has to be part and parcel of this discussion. Its not just about cutting medicare or doing this. Im not the political scientist here, but this Public Education<\/a> point there was a man wrote a book back in the 80s called coming to public judgment. He talked about opinion making and opinion formation in a democracy. Paul can give us all the facts and analysis and boy its critical to this process, but weve got to get back to some point that we get people to care about the future of the country, the role of debt in that future, how were treating our elderly, how we treat our kids as gene points out. And i think the real issue here that all feeds into that is its not medicare per se. Its this whole thing. Its not in a very good place. Ill close with that and leave it to joe. Thank you, keith. I admire your appreciation of trust funds. I just want to clarify that the example, the one shining example and it truly is the one shining example referred to Social Security<\/a>. Why is that . Its because people retirees understand when their Social Security<\/a> payments might be cut, because thats real money to them. But when we talk about medicare, were not really talking about cutting things that people fully understand. By and large the federal governments approach to problems that may or may not be revealed by the Trustees Report<\/a> have been to put it off a little bit, make adjustments in payments to providers. The political argument, of course, is were not affecting your benefits, no, certainly we wouldnt do that. So basically what weve seen instead of this wonderful example from Social Security<\/a>, what weve seen in the medicare world has been modest changes temporary putting it off as opposed to fundamental structural reform. I think thats something we could debate about. Can i respond to that, joe . Go ahead. Joes a great friend. We have these debates many times. I would say thats harder to do, much harder to do in the medicare area than it is to do in the Social Security<\/a> area. Yeah. In fact, what happened through the 80s and 90s was exactly as described, many changes incrementally. Health care is a really dynamic technological area and in many other ways. Keeping the pressure on all those things is a good thing to do. If i could comment on one other thing that maya said. Im offering two amendments. One of them is on your trust fund analysis. This is basically more Political Science<\/a>. The Political Science<\/a> is if you have something where youre basically matching spending and revenues and you suddenly go out of balance and it has to be paid for with the trust fund, then you force people to come to grips with it. In Social Security<\/a> that would work if you didnt have things like demographic shifts, declines in the birthrate. If all of a sudden the spending is a little too high because if you look at the trust fund balance in Social Security<\/a>, a piece of it is medicare, youre hitting this point where youre paying out 30 more than youre getting revenues and the trust fund goes out of balance. The old trust fund notion was if you go out of balance slightly, you just have to go back into balance slightly. In the Health Care Trust<\/a> funds a huge amount have come out to general revenues. To say that part b is in balance is totally logical. That is true. But the other point i want to get to is something maya said about i hear this all the time about we dont know what to do with health care. I agree in the sense of the following. Trying to determine what health care should look like ten years from now is like trying to decide what the economy of france thats not the issue. The issue of whats the process, whats the political process as we said to deal with that. Ill do this by way of analogy. We know what not to do suppose im debating with my wife about what our kid should do. I think the killed should be playing the piano and no, the kid should be studying. Thats a tough decision, right . Maybe we dont know what to do. The kids playing in traffic. Do we know what to do . Or do we not not know what to do . You cant let the kid play in traffic and i have argued in a lot of places the fundamental original sin of health care it goes beyond government, it goes to the private sector, is you cannot set up a system where patients and providers bargain with each other and order everyone else to play. It creates an infinite demand and supply and you cannot do. So the result is somebody has to be able to say, no, it can be government, through price controls. It can be like in Medicare Advantage<\/a> where you sort of voucherize the system, which you force the Insurance Companies<\/a> are the providers like Kaiser Permanente<\/a> you make that decision. Or put it on the individual which is tough because then the poor cant get things. Thats what you have to do. And the fight is going to be whats the right mix of those things but you cant let the kid play in the street. So we do know what to do. Its actually simple. Its not simple politically but economically to define it. I would like to respond a bit. First of all, i think the problem that were confronted with is people have a very clear idea about what it is they dont like in Health Policy<\/a>. They dont like bureaucracy, paperwork, they dont like high deductibles, high premiums. Theres a lot they dont like, but if you get them to be clear about what it is they actually want, well, thats different. Thats a little bit more difficult. I think part of the problem that were having in Health Policy<\/a> and this applies to medicare and the general Health Care Debate<\/a>, is that were actually not having a Health Care Debate<\/a>. Were not really debating, you know . You go to all of the conferences, working groups, all that sort of thing. Nobody is saying we ought to restrict access to health care. No, we ought to control costs, we ought to improve the quality so were not debating those things. Were actually not in a Health Policy<\/a> debate. I guess i can claim the professional monopoly here. Were having a Political Science<\/a> debate. The issue is actually who is going to make the key decisions in this system. Ultimately at the end of the day that seems to be the thing that is so bitter about all of this. There are a number of our colleagues we all know them very well who very, very strongly believe that the government should exercise a monopoly over the Health Care System<\/a>. They call it a single payer system. It is internally consistent it is internally logic. Theres an internal logic to it. Free care for all. It will be financed by taxes and the government will ultimately control spending through a global budget. Others believe in a free market. When you say, what do you mean by a free market, well, then it starts to get messy. Because people have different ideas about what a free market is in health care. Frankly, the United States<\/a> has not had a free market in Health Market<\/a> since the 30s when doctors were getting money and giving free care to those in the neighborhood. We have a large set of public programs, medicare being the largest and we have a private sector that is so highly regulated that now Health Insurance<\/a> is virtually a public uhuh tillty. Our problem is we havent been able to carefully calibrate or you know we havent really drawn any clear lines where people are in agreement. I think this debate going to be more intense regardless of what happens on capitol hill this week or next week. I think were in for a debate on health care for the rest of our lives. Because this is a 3. 2 trillion sector of the economy which as you point out is immensely complex and its not clear to everybody what is what works best. There are certain areas clearly in health care where the Public Sector<\/a> has a primary and a valuable and superior role. And there are other areas where the public where the Public Sector<\/a> actually does a very poor job and frankly i think delivering health care to poor people and medicaid is one of them. Ill jump in on both of those debates. First off, who doesnt love a good debate about trust funds. Thats a great one. And i think the trust funds have been a mixed bag overall. So on the negative side, what they have done is they have created more of an entitlement feeling, a feeling of being entitled to the benefits because you believe you paid into the program regardless of the fact that people and gene has done such great work on this people are getting much more out of the program than they paid into it. The second problem with the trust funds theyre not an effective mechanism for saving. If you can save because you know a big demographic cohort is coming along you can save in advance thats an excellent tool but they havent worked that way at all because by necessity theyre invested in government bonds. That makes sense. Theyre a safe investment. Thats how we finance deficits. I mean, a third effect of trust funds, boy, do i duke it out with my father who is usually protesting, because he wants everything he paid in because he deserves it, but the point thats often missed is that when we were using money that went into trust funds to finance the rest of government, it meant that those generations paid lower taxes for defense or the environment or whatever other things there were. And so when you talk about that money being repaid being owed by you guys, the young people in the audience, it is really sort of a double benefit to an older generation that both put money into the program to ensure the benefits and then used it to subsidize the rest of government and those are some of the problems with trust funds. One of the good things with trust funds, they do create a warning sign or potentially an action forcing moment. And the big problem with government right now is they dont do anything until the very last minute. I mean, we are we are right now using extraordinary measures to get around the fact that we havent lifted the debt ceiling. Thats preposterous. We dont just miss the deadlines for this, we missed the deadline for everything. Everything. And part of it is a problem that people these two parties that are so pitted against each other think that they will not look like they negotiated hard enough if they come up with an agreement before the last segment. So maybe the challenge is how to figure out how something that creates an action forcing moment that doesnt create an inflexibility in the budget that we currently have. Joe, i know you want to get to questions. I want to talk quickly about the overall Health Care Debate<\/a> and the issues not addressed. But there are so many fundamental core questions and tradeoffs in Health Insurance<\/a>. Starting with what is the role of insurance . The role of insurance is to pool risks. Its also thats the obvious one. Nobody should go bankrupt because of Health Care Costs<\/a>. But its also and theres less agreement on this. It creates subsidies, so who should subsidize who . Should rich subsidize poor . Should young subsidize old, should healthy subsidize the sick . Those are questions that arent discussed head on and thats part of whats going on in this debate right now. The tension about who should be subsidizing who. Another role of insurance or another role that insurance plays that im not sure it should, it does a lot to cause force savings for big moments. When you have a baby thats an expensive outlay. My insurance told me my daughter wasnt covered because i didnt have a child, but i just had a child. I had a long fight. Very expensive, its not it turns out. We had to work through that. But those are the kind of things that there are big outlays that are somewhat predictable. Is the kid going to get braces soon . Theres a role for saving in advance of big outlays of health care. We havent come to terms with the role of insurance. We still wont agree but at least we should have that discussion. That discussion is nowhere to be found in the Current Health<\/a> care debate and then questions about who should be choosing what things people should have have to have. I go back to kind of the Public Policy<\/a>. First principles. What problems are you trying to solve, what the different structures that you could use to solve them. Disagreements legitimate. But lets lay them out transparently and then the pros and cons. Well be having that debate forever. We have great comments. We have time for two questions. Quickly, move quickly. Speak quickly. [ indiscernible ]. I heard all of you say ill repeat your question, go on. [ indiscernible ]. Whats the question . Nothing in this report is going to [ indiscernible ]. It sounds like all good news. Should have been, might have been a pressure to get this done. What is it going to take to move this forward to have the debate and then also to potentially what happens with [ indiscernible ]. I had it for a while. So the questions are what happens to ipab and whats going to get congress to do anything . I can tell you there are bills on the hill that have been proposed to repeal ipab. There was a special resolution as of february of this year but it does cost money against the cbo base line. I dont believe its in any of the bills in the hill that are moving now. Not part of the aca measure. I dont know about how Getting Congress<\/a> to do something. Okay. A question. Quickly. Hi. Next question over here. I dont want to does it work . It works. Paul heldman from heldman simpson partners. Theres a couple of things that jumped out. Theres again a sharp jump in Medicare Part<\/a> d per capita growth and a sharp jump in 2019 medicare per capita spending. And im wondering how what are the causes of those and what should we read into that about future trends . Also, if you can explain why the manufacturer rebates went up. You just suddenly noticed new data or seeing some new trend and whats causing that . Well, theres been a lot of shifts in the market. As i went through in some respect. And in particular, there have been more rebates that have been earned in the program and thats continuing to come through. You can actually look at the projections of the share of rebates that are coming through and they have changed dramatically over a very short period of time. They were projecting that will continue for some period in the future. In terms of year to year changes we have moved to a more micromodel in terms of building up the trends. So we might have we might be more explicit predicting specific drugs going off patent or coming on market. Thank you very much. Unfortunately we have run out of time. Please join me in thanking the panel for a terrific discussion. Thank you. President donald trump just tweeting he has left paris and hes on his way back to the United States<\/a>. He says hell be heading to new jersey to at tend the womens u. S. Open. He also tweeted he had great conversations with french president macron. He was in france for the past two days and he attended bastille day festivities. You can watch video at cspan. Org. The nations governors continue with their annual summer meeting in rhode island. Live coverage on cspan 2 at 1 15 eastern with Vice President<\/a> mike pence and canadian Prime Minister<\/a> Justin Trudeau<\/a> discussing the global economy. Tomorrow, teslas ceo elon musk will talk to the governors about the future of the workforce, computer coding and civic engagement. Cspans live coverage tomorrow morning starts at 9 30 eastern. A reminder you can find it online at cspan. Org or listen with the free cspan radio app. Sunday night on after words syndicated columnist naomi klein on her book no is not enough, resisting trumps shock politics and winning the world we need. Shows interviewed by the cofounder of code pink. I wonder if you can tell us about how the stage was set for trump. I see this as very much a bipartisan process that the table that was set for trump. And, you know, its isnt just about politic, but about media. News conference. The table was set for him in so many ways that all he needed to do was show up because it was sort of we were already treating elections like reality tv shows. You know, we already had a media landscape that was much more interested in interpersonal dramas between candidates than in in depth coverage of the issues. We already had democrats using the tools of corporate branding themselves. President obama was a fantastic brand. He used incredibly cutting edge marketing techniques. A lot of us felt that there was, you know, that behind the claims that he was leading this, you know, deep change and transformation there wasnt enough change and that helped set the table for trump. Watch after words sunday night on book tv. The Senate Intelligence<\/a> committee considered the nomination of david glawe to serve as Homeland Security<\/a> undersecretary for intelligence and analysis. Hes a former commissioner in the office of intelligence with the u. S. Customs and border protection. This hearing is about an hour","publisher":{"@type":"Organization","name":"archive.org","logo":{"@type":"ImageObject","width":"800","height":"600","url":"\/\/ia600607.us.archive.org\/13\/items\/CSPAN3_20170714_131500_Medicare_Actuary_Provides_Update_on_Trustees_Annual_Report\/CSPAN3_20170714_131500_Medicare_Actuary_Provides_Update_on_Trustees_Annual_Report.thumbs\/CSPAN3_20170714_131500_Medicare_Actuary_Provides_Update_on_Trustees_Annual_Report_000001.jpg"}},"autauthor":{"@type":"Organization"},"author":{"sameAs":"archive.org","name":"archive.org"}}],"coverageEndTime":"20240628T12:35:10+00:00"}