Health-Related Options for Reducing the Deficit: 2014 to 2023

December 5, 2013

This document is a reprint of Chapter 5 of Congressional Budget Office, Options for Reducing the Deficit: 2014 to 2023 (November 2013).

Most of the 16 options in this report would either decrease federal spending on health programs or increase revenues (or equivalently, reduce tax expenditures) as a result of changes in tax provisions related to health care. Some options would result in a reallocation of health care spending—from the federal government to businesses, households, or state governments, for example—and most would give parties other than the federal government stronger incentives to control costs while exposing them to more financial risk.

Eleven of the options are similar in scope to those in CBO’s previous volumes of budget options. For each of those options, the text provides background information, describes the possible policy change or changes, presents the estimated effects on spending or revenues, and summarizes arguments for and against the changes. The other five options—Options 1, 6, 7, 10, and 15—address broad approaches to changing federal health care policy, all of which would offer lawmakers a variety of alternative ways to alter current law.

Options Related to Health

Option Number Title Savings, 2014–2023*
(Billions of Dollars) 1 Impose Caps on Federal Spending for Medicaid 105 to 606 2 Add a “Public Plan” to the Health Insurance Exchanges 158 3 Eliminate Exchange Subsidies for People With Income Over 300 Percent of the Federal Poverty Guidelines 109 4 Limit Medical Malpractice Torts 64 5 Introduce Minimum Out-of-Pocket Requirements Under TRICARE for Life 31 6 Convert Medicare to a Premium Support System 22 to 275 7 Change the Cost-Sharing Rules for Medicare and Restrict Medigap Insurance 114 8 Raise the Age of Eligibility for Medicare to 67 19 9 Increase Premiums for Parts B and D of Medicare 287 10 Bundle Medicare’s Payments to Health Care Providers 17 to 47 11 Require Manufacturers to Pay a Minimum Rebate on Drugs Covered Under Part D of Medicare for Low-Income Beneficiaries 123 12 Modify TRICARE Enrollment Fees and Cost Sharing for Working-Age Military Retirees 20 to 71 13 Reduce or Constrain Funding for the National Institutes of Health 13 to 28 14 End Enrollment in VA Medical Care for Veterans in Priority Groups 7 and 8 48 15 Reduce Tax Preferences for Employment-Based Health Insurance 240 to 537 16 Increase the Excise Tax on Cigarettes by 50 Cents per Pack 37

* For options primarily affecting mandatory spending or revenues, savings sometimes would derive from changes in both. When that is the case, the savings shown include effects on both mandatory spending and revenues. For options primarily affecting discretionary spending, the savings shown are the decrease in discretionary outlays.