| APPENDIX
C |
Projected Health Care Spending
Under an Alternative Fiscal Scenario
For the projections of federal Medicare spending in the main text, this study uses the Congressional Budget Office's (CBO's) baseline budget projections for 2008 to 2017, which assume no change in current federal law. Based on current law, CBO's baseline assumes that the sustainable growth rate (SGR) mechanism for updating Medicare's payment rates for physicians will reduce those rates by about 4 percent or 5 percent annually for at least the next several years. However, since 2003, the Congress has taken action to prevent the reductions in physician payment rates that would have occurred under the SGR. Therefore, CBO developed an alternative set of long-term projections that assume that similar action will be taken for the next 10 years. Specifically, under that alternative scenario, Medicare's physician payment rates are assumed to grow with the Medicare economic index, which measures inflation in the inputs used for physicians' services. Projected outlays for Medicare over the next 75 years are similar in both that scenario and the one presented in the main text because the assumption that Medicare's physician fees will be updated to account for inflation has only a minor effect over the long term (see Figure C-1).
Comparison of CBO's Projections of Spending on Health Care: Extending the Baseline vs. Incorporating an Adjustment in Physician Fees Under Medicare
(Percentage of gross domestic product)
Source: Congressional Budget Office.
Note: Currently, a mechanism in federal law would reduce Medicare's fees for physicians' services. For its alternative scenario, CBO assumes that those fees are updated to account for inflation in the inputs used for physicians' services.
