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237CG entitled 'Fiscal, Health & Retirement Challenges' which was 
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United States Government Accountability Office: 
GAO: 

Fiscal, Health & Retirement Challenges: 

The Honorable David M. Walker: 
Comptroller General of the United 
States:  

Conference of Consulting Actuaries: 
Annual Conference: 
San Antonio, TX: 
October 22, 2007: 

GAO-08-237CG: 

Composition of Federal Spending:  

[See PDF for image] - graphic text: 

There are three pie charts, containing the following compositions of 
spending by category: 

Year: 1966;
Defense: 43%;
Social Security: 15%; 
Medicare and Medicaid: 1%; 
Net Interest: 7%; 
All Other: 34%. 

Year: 1986;
Defense: 28%;
Social Security: 20%; 
Medicare and Medicaid: 10%; 
Net Interest: 14%; 
All Other: 29%. 

Year: 2006;
Defense: 20%;
Social Security: 21%; 
Medicare and Medicaid: 19%; 
Net Interest: 9%; 
All Other: 32%. 

Source: Office of Management and Budget and the Department of the 
Treasury. 

Note: Numbers may not add to 100 percent due to rounding. 

[End of figure] 

Federal Spending for Mandatory and Discretionary Programs: 

[See PDF for image] - graphic text: 

There are three pie charts, containing the following compositions of 
spending by category: 

Year: 1966;
Discretionary: 67%; 
Mandatory: 26%; 
Net Interest: 7%.  

Year: 1986;
Discretionary: 44%; 
Mandatory: 42%; 
Net Interest: 14%.  

Year: 2006;
Discretionary: 38%; 
Mandatory: 53%; 
Net Interest: 9%.  

Source: Office of Management and Budget.  

[End of figure]  

Table: Fiscal Year 2005 and 2006 Deficits and Net Operating Costs:  

On-Budget Deficit, Fiscal Year 2005 ($ Billion): (494); 
On-Budget Deficit, Fiscal Year 2006 ($ Billion): (434); 

Unified Deficit[a], Fiscal Year 2005 ($ Billion): (318); 
Unified Deficit[a], Fiscal Year 2006 ($ Billion): (248); 

Net Operating Cost[b], Fiscal Year 2005 ($ Billion): (760); 
Net Operating Cost[b], Fiscal Year 2006 ($ Billion): (450);  

Sources: Office of Management and Budget and Department of the 
Treasury.  

[a] Includes $173 billion in Social Security surpluses for fiscal year 
2005 and $185 billion for fiscal year 2006; $2 billion in Postal 
Service surpluses for fiscal year 2005 and $1 billion for fiscal year 
2006.  

[b] Fiscal year 2005 and 2006 net operating cost figures reflect 
significant but opposite changes in certain actuarial costs. For 
example, changes in interest rates and other assumptions used to 
estimate future veterans’ compensation benefits increased net operating 
cost by $228 billion in 2005 and reduced net operating cost by $167 
billion in 2006. Therefore, the net operating costs for fiscal years 
2005 and 2006, exclusive of the effect of these actuarial cost 
fluctuations, were ($532) billion and ($617) billion, respectively.  

[End of table]  

Table: Major Fiscal Exposures ($ trillions): 

Explicit liabilities (Publicly held debt, Military & civilian pensions 
& retiree health, Other): 
2000: $6.9; 
2006: $10.4; 
Percent increase: 52. 

Commitments & contingencies (e.g., PBGC, undelivered orders): 
2000: 0.5; 
2006: 1.3
Percent increase: 140.  

Implicit exposures, 2000: 13.0; 
Implicit exposures, 2006: 38.8; 
Implicit exposures, Percent increase: 197; 
Future Social Security benefits, 2000: 3.8; 
Future Social Security benefits, 2006: 6.4; 
Future Social Security benefits, Percent increase: [Empty]; 
Future Medicare Part A benefits, 2000: 2.7; 
Future Medicare Part A benefits, 2006: 11.3; 
Future Medicare Part A benefits, Percent increase: [Empty]; 
Future Medicare Part B benefits, 2000: 6.5; 
Future Medicare Part B benefits, 2006: 13.1; 
Future Medicare Part B benefits, Percent increase: [Empty]; 
Future Medicare Part D benefits, 2000: 0; 
Future Medicare Part D benefits, 2006: 7.9; 
Future Medicare Part D benefits, Percent increase: [Empty]; 
Total, 2000: $20.4; 
Total, 2006: $50.5; 
Percent increase: 147.  

Source: 2000 and 2006 Financial Report of the United States 
Government.  

Note: Totals and percent increases may not add due to rounding. 
Estimates for Social Security and Medicare are at present value as of 
January 1 of each year and all other data are as of September 30.  

[End of table] 

Table: How Big is Our Growing Fiscal Burden?  

This fiscal burden can be translated and compared as follows:  

Total major fiscal exposures: $50.5 trillion; Total household net 
worth[1]: $53.3 trillion; Burden/Net worth ratio: 95 percent. 

Burden[2]: 
Per person: $170,000; 
Per full-time worker: $400,000; 
Per household: $440,000. 

Income: 
Median household income[3]: $46,326; 
Disposable personal income per capita[4]: $31,519.  

Source: GAO analysis.  

Notes: (1) Federal Reserve Board, Flow of Funds Accounts, Table B.100, 
2006:Q2 (Sept. 19, 2006); (2) Burdens are calculated using estimated 
total U.S. population as of 9/30/06, from the U.S. Census Bureau; full-
time workers reported by the Bureau of Economic Analysis, in NIPA table 
6.5D (Aug. 2, 2006); and households reported by the U.S. Census Bureau, 
in Income, Poverty, and Health Insurance Coverage in the United States: 
2005(Aug. 2006); (3) U.S. Census Bureau, Income, Poverty, and Health 
Insurance Coverage in the United States: 2005(Aug. 2006); and (4) 
Bureau of Economic Analysis, Personal Income and Outlays: October 2006, 
table 2, (Nov. 30, 2006).  

[End of table] 

Potential Fiscal Outcomes Under Baseline Extended (January 2001); 
Revenues and Composition of Spending as a Share of GDP.  

[See PDF for image] - graphic text. 

This is a line/stacked bar graph with one line (revenue) and four 
stacked bars containing four spending items (Net interest, Social 
Security, Medicare and Medicaid, and All other spending). The vertical 
axis represents Percent of GDP and the horizontal axis represents 
fiscal years 2005, 2015[a], 2030[a], and 2040[a]. 

Source: GAO’s January 2001 analysis.  

[a] All other spending is net of offsetting interest receipts.  

[End of graph]  

Potential Fiscal Outcomes Under Alternative Simulation; Revenues and 
Composition of Spending as a Share of GDP.  

[See PDF for image] - graphic text. 

This is a line/stacked bar graph with one line (revenue) and four 
stacked bars containing four spending items (Net interest, Social 
Security, Medicare and Medicaid, and All other spending). The vertical 
axis represents Percent of GDP and the horizontal axis represents 
fiscal years 2006, 2015, 2030, and 2040.  

Source: GAO’s August 2007 analysis.  

Notes: AMT exemption amount is retained at the 2006 level through 2017 
and expiring tax provisions are extended. After 2017, revenue as a 
share of GDP returns to its historical level of 18.3 percent of GDP 
plus expected revenues from deferred taxes, i.e. taxes on withdrawals 
from retirement accounts. Medicare spending is based on the Trustees 
April 2007 projections adjusted for the Centers for Medicare and 
Medicaid Services alternative assumption that physician payments are 
not reduced as specified under current law. 

[End of graph] 

Social Security, Medicare, and Medicaid Spending as a Percent of GDP:  

[See PDF for image] - graphic text.  

This is a line graph with three stacked lines (Social Security, 
Medicaid, and Medicare). The vertical axis represents Percent of GDP 
and the horizontal axis represents fiscal years 2000 through 2080.  

Source: GAO analysis based on data from the Office of the Chief 
Actuary, Social Security Administration, Office of the Actuary, Centers 
for Medicare and Medicaid Services, and the Congressional Budget 
Office.  

Notes: Social Security and Medicare projections based on the 
intermediate assumptions of the 2006 Trustees’ Reports. Medicaid 
projections based on CBO’s August 2006 short-term Medicaid estimates 
and CBO’s December 2005 long-term Medicaid projections under mid-range 
assumptions.  

[End of graph] 

Federal Tax Expenditures Exceeded Discretionary Spending for Half of 
the Last Decade:  

[See PDF for image] - graphic text.  

This is a line graph with three lines (Mandatory spending; Sum of tax 
expenditure revenue loss estimates; and Discretionary spending). The 
vertical axis represents Dollars in billions (in real 2005 dollars) and 
the horizontal axis represents fiscal years 1982 through 2005.  

Source: GAO analysis of OMB budget reports on tax expenditures, fiscal 
years 1976-2007.  

Note: Summing tax expenditure estimates does not take into account 
interactions between individual provisions. Outlays associated with 
refundable tax credits are included in mandatory spending. 

[End of graph] 

Revenue Loss Estimates for the Largest Tax Expenditures Reported for 
Fiscal Year 2006:  

[See PDF for image] - graphic text. 

This is a bar graph with the vertical axis representing Revenue loss 
estimates (dollars in billions) and the horizontal axis depicting bars 
indicating the amount of expenditures in six categories. 

Revenue loss estimate, Exclusion of employer contributions for medical 
insurance premiums and medical care: 187.5 (Treasury estimated income 
tax revenue losses: 125; Approximate payroll tax revenue losses: 
62.5[A]; 
Revenue loss estimate, Deductability of mortgage interest on owner-
occupied homes: 68.3; 
Revenue loss estimate, Net exclusion of pension contributions and 
earnings: defined benefit plans: 49[A]; 
Revenue loss estimate, Capital gains except agriculture, timber, iron 
ore, and coal): 48.6; 
Revenue loss estimate, Deductability of nonbusiness states and local 
taxes other than on owner-occupied homes: 43.1; 
Revenue loss estimate, Net exclusion of pension contributions and 
earnings: 401(k) plans: 40.8[A].  

Source: GAO analysis of OMB, Analytical Perspectives, Budget of the 
United States Government, Fiscal Year 2008.  

[A] The value of employer-provided health insurance is excluded from 
Medicare and Social Security payroll taxes. Some researchers have 
estimated that payroll tax revenue losses amounted to more than half of 
the income tax revenue losses in 2004, and we use this estimate for 
2006. The research we are aware of dealt only with health care, 
therefore the 50 percent figure may not apply to other items that are 
excluded from otherwise applicable income and payroll taxes. 

[End of graph] 

State and Local Governments Face Increasing Fiscal Challenges: 

[See PDF for image] - graphic text. 

This is a line graph with two lines (Operating Surplus/Deficit Measure 
and Net-lending/Net-borrowing). The vertical axis represents Percent of 
GDP from -6 to +2 and the horizontal axis represents fiscal years 1980 
through 2050. 

Sources: Historical data from National Income and Product Accounts. 
Historical data from 1980–2006, GAO projections from 2007–2050 using 
many CBO projections and assumptions, particularly for next 10 years. 

[End of graph] 

State and Local Fiscal Challenges Add to the Federal Government’s 
Fiscal Challenge: 

[See PDF for image] - graphic text. 

This is a line graph with two lines (Federal Surplus/Deficit and 
Combined Surplus/Deficit). The vertical axis represents Percent of GDP 
from -20 to +5 and the horizontal axis represents fiscal years 2000 
through 2050. 

Source: Historical data from National Income and Product Accounts, GAO 
Analysis. 

Note: Historical data from 2000–2006, projections from 2007–2050; state 
and local balance measure is similar to the federal unified budget 
measure. Federal Simulation Assumptions: Discretionary spending grows 
with GDP after 2007. AMT exemption amount is retained at the 2006 level 
through 2017 and expiring tax provisions are extended. After 2017, 
revenue as a share of GDP returns to its historical level of 18.3 
percent of GDP plus expected revenues from deferred taxes, i.e. taxes 
on withdrawals from retirement accounts. Medicare spending is based on 
the Trustees’ April 2007 projections adjusted for the Centers for 
Medicare and Medicaid Services’ alternative assumption that physician 
payments are not reduced as specified under current law. 

[End of graph] 

Current Fiscal Policy Is Unsustainable:  

The “Status Quo”is Not an Option: 
* We face large and growing structural deficits largely due to known 
demographic trends and rising health care costs. 
*  GAO’s simulations show that balancing the budget in 2040 could 
require actions as large as: 
- Cutting total federal spending by 60 percent or; 
- Raising federal taxes to 2 times today's level. 

Faster Economic Growth Can Help, but It Cannot Solve the Problem: 
* Closing the current long-term fiscal gap based on reasonable 
assumptions would require real average annual economic growth in the 
double digit range every year for the next 75 years. 
* During the 1990s, the economy grew at an average 3.2 percent per 
year. 
* As a result, we cannot simply grow our way out of this problem. Tough 
choices will be required.  

The Way Forward: A Three-Pronged Approach: 

1. Improve Financial Reporting, Public Education, and Performance 
Metrics. 
2. Strengthen Budget and Legislative Processes and Controls. 
3. Fundamentally Reexamine & Transform for the 21st Century (i.e., 
entitlement programs, other spending, and tax policy).  

Solutions Require Active Involvement from both the Executive and 
Legislative Branches.  

The Way Forward: Improve Financial Reporting, Public Education, and 
Performance Metrics: 

* Improve transparency & completeness of President’s budget proposal: 
- Return to 10-year estimates in budget both for current policies and 
programs and for policy proposals; 
- Include in the budget estimates of long-term cost of policy proposals 
and impact on total fiscal exposures; 
- Improve transparency of tax expenditures; 
* Consider requiring President’s budget to specify & explain a fiscal 
goal and a path to that goal within 10-year window—or justify an 
alternative deadline; 
* Require annual OMB report on existing fiscal exposures [liabilities, 
obligations, explicit & implied commitments]; 
* Require enhanced financial statement presentation and preparation of 
summary annual report that is both useful and used; 
* Increase information on long-range fiscal sustainability issues in 
Congressional Budget Resolution & Budget Process; 
* Develop key national (outcome-based) indicators (e.g. economic, 
security, social, environmental) to chart the nation’s posture, 
progress, and position relative to the other major industrial 
countries. 

The Way Forward: Strengthen Budget and Legislative Processes and 
Controls: 

* Restore discretionary spending caps & PAYGO rules on both spending 
and tax sides of the ledger; 
* Develop mandatory spending triggers [with specific defaults], and 
other action-forcing provisions (e.g., sunsets) for both direct 
spending programs and tax preferences; 
* Develop, impose & enforce modified rules for selected items (e.g., 
earmarks, emergency designations, and use of supplementals); 
* Require long-term cost estimates (e.g. present value) for any 
legislative debate on all major tax and spending bills, including 
entitlement programs. Cost estimates should usually assume no sunset; 
* Extend accrual budgeting to insurance & federal employee pensions; 
develop techniques for extending to retiree health & environmental 
liabilities; 
* Consider biennial budgeting; 
* Consider expedited line item rescissions from the President that 
would only require a majority vote to override the proposed 
rescission(s). 

The Way Forward: Fundamentally Reexamine & Transform: 

* Restructure existing entitlement programs; 
* Reexamine and restructure the base of all other spending; 
* Review & revise existing tax policy, including tax preferences and 
enforcement programs; 
* Expand scrutiny of all proposed new programs, policies, or 
activities; 
* Reengineer internal agency structures and processes, including more 
emphasis on long-term planning, integrating federal activities, and 
partnering with others both domestically and internationally; 
* Strengthen and systematize Congressional oversight processes; 
* Increase transparency associated with government contracts and other 
selected items; 
* Consider a capable, credible, bi-partisan budget, entitlement, and 
tax reform commission. 

Key National Indicators:  

* What: A portfolio of economic, social, and environmental outcome- 
based measures that could be used to help assess the nation’s and other 
governmental jurisdictions’ position and progress; 
* Who: Many countries and several states, regions, and localities have 
already undertaken related initiatives (e.g., Australia, New Zealand, 
Canada, United Kingdom, Oregon, Silicon Valley (California) and 
Boston); 
* Why: Development of such a portfolio of indicators could have a 
number of possible benefits, including; 
- Serving as a framework for related strategic planning efforts; 
- Enhancing performance and accountability reporting; 
- Informing public policy decisions, including much needed baseline 
reviews of existing government policies, programs, functions, and 
activities; 
- Facilitating public education and debate as well as an informed 
electorate; 
* Way Forward: Consortium of key players housed by the National 
Academies domestically and related efforts by the OECD and others 
internationally.  

Key National Indicators: Where the United States Ranks: 

The United States may be the only superpower, but compared to most 
other OECD countries on selected key economic, social, and 
environmental indicators, on average, the U.S. ranks 16 out of 28. 

OECD Categories for Key Indicators (2006 OECD Factbook): 

* Population/Migration;
* Energy;
* Environment;
* Labor Market;
* Education;
* Public Finance;
* Science & Tech.;
* Quality of Life;
* Macroeconomic Trends;
* Economic Globalization
* Prices.  

Source: 2006 OECD Factbook. 

Key Elements for Economic Security in Retirement: 

* Adequate retirement income: 
- Savings; 
- Social Security; 
- Pensions; 
- Earnings from continued employment (e.g., part-time). 

* Affordable health care: 
- Medicare; 
- Retiree health care. 

* Long-term care (a hybrid). 

* Major Players: 
- Employers; 
- Government; 
- Individuals; 
- Family; 
- Community. 

Aged Population as a Share of Total U.S. Population Will Continue to 
Increase:  

[See PDF for image] - graphic text. 

This is a line graph with one line (population aged 65 and over) with 
the vertical axis representing percent of total population from 0 to 25 
percent and the horizontal axis representing years 1950 through 2075.  

Source: Office of the Chief Actuary, Social Security Administration.  

Note: Projections based on the intermediate assumptions of the 2007 
Trustees’ Reports. 

[End of graph].  

U.S. Labor Force Growth Will Continue to Decline: 

[See PDF for image] - graphic text. 

This is a line graph with one line (decline of labor force growth) with 
the vertical axis representing percentage change (five-year average) 
from 0 to 3 percent, and the horizontal axis representing years 1970 
through 2080.  

Source: GAO analysis of data from the Office of the Chief Actuary, 
Social Security Administration.  

Note: Percentage change is calculated as a centered 5-year moving 
average of projections based on the intermediate assumptions of the 
2007 Trustees Reports.  

[End of graph] 

Personal Savings Rate Has Decline: 

[See PDF for image] - graphic text. 

This is a line graph with one line (personal savings rate) with the 
vertical axis representing percent of disposable income (from -2.0 to 
12.0), and the horizontal axis representing years 1960 through 2006.  

Source: Bureau of Economic Analysis.   

[End of graph] 

Key Dates Highlight Long Term Challenges of the Social Security 
System:  

OASI:
Date: 2009;
Event: Cash surplus begins to decline; 
Date: 2018;
Event: Annual benefit costs exceed cash revenue from taxes; 
Date: 2028; 
Event: Trust fund ceases to grow because even taxes plus interest fall 
short of benefits; 
Date: 2042; 
Event: Trust fund exhausted.  

DI:
Date: 2005;
Event: Annual benefit costs exceed cash revenue from taxes; 
Date: 2013; 
Event: Trust fund ceases to grow because even taxes plus interest fall 
short of benefits; 
Date: 2026; 
Event: Trust fund exhausted.  

OASDI:
Date: 2009;
Event: Cash surplus begins to decline; 
Date: 2017;
Event: Annual benefit costs exceed cash revenue from taxes; 
Date: 2027; 
Event: Trust fund ceases to grow because even taxes plus interest fall 
short of benefits; 
Date: 2041; 
Event: Trust fund exhausted.  

Source: Social Security Administration, The 2007 Annual Report of the 
Board of Trustees of the Federal Old-Age and Survivors Insurance and 
Disability Insurance Trust Funds(Washington, DC: April 2007).  

[End of table] 

Possible Way Forward on Social Security Reform:  

Make little or no changes to those who are near retirement or already 
retired and make a number of adjustments that would affect younger 
workers:  

* Phase-in an increase in the normal retirement age and index it to 
life expectancy; 
* Consider phasing-in an increase in the early retirement age and index 
it to life expectancy with a modified disability access provision; 
* Modify income replacement and/or indexing formulas for middle and 
upper income earners; 
* Strengthen the minimum benefit; 
* Consider a modest adjustment to the COLA formula; 
* Increase the taxable wage base, if necessary; 
* Consider supplemental individual accounts and mandatory individual 
savings on a payroll deduction basis (e.g., a minimum 2 percent payroll 
contribution and a program designed much like the Federal Thrift 
Savings Plan with a real trust fund and real investments).  

Pension System Faces Variety of Challenges: 

* Significant coverage gaps and pre-retirement leakage; 

* Long term decline in the number of DB plans and active participants 
and change in the nature of DB plans; 

* Recent DB freezes and retiree health plan limitations are likely to 
accelerate due to prospective changes in current accounting for pension 
and post-employment benefits; 

* Recent and prospective large plan terminations by bankrupt sponsors 
have placed Pension Benefit Guaranty Corporation (PBGC), the federal 
agency insuring benefits, in financial jeopardy: 
- Stock market, interest rate declines earlier this decade worsened 
overall plan funding; 
- Demographics, global competition (steel, auto), industry deregulation 
restructuring (airlines) have contributed to both plan and corporate 
weakness; 

* Plan funding rules and PBGC premiums have proven to be inadequate. 

Pension Protection Act of 2006: An Important Reform with Unfinished 
Business: 

* PPA shrinks, but does not close, many loopholes regarding DB plan 
funding; 

* Ultimately does not address fundamental mismatch between DB plan 
assets and liabilities; 

* Will likely not reverse long-term decline in DB system; 

* Long phase-in period and uncertain effects suggest that careful 
ongoing monitoring of DB plans and PBGC deficit is needed; 

* Financing of adequate retirement for all Americans continues to pose 
a major national challenge: 
- Issues of coverage remain largely unanswered; 
- Appropriate balance of responsibility for retirement among employers, 
government and workers remains unclear. 

Number of Non-elderly Uninsured Americans, 1999-2006:  

[See PDF for image] - graphic text. 

This is a bar graph of the number of non-elderly uninsured Americans 
with the vertical axis representing population in millions from 0 to 
50 and the horizontal axis representing years 1999 through 2006.  

Year: 1999;
Non-elderly Uninsured Americans: 38.8.  

Year: 2000;
Non-elderly Uninsured Americans: 38.4.  

Year: 2001;
Non-elderly Uninsured Americans: 39.8.  

Year: 2002;
Non-elderly Uninsured Americans: 42.0.  

Year: 2003;
Non-elderly Uninsured Americans: 43.4.  

Year: 2004;
Non-elderly Uninsured Americans: 43.5.  

Year: 2005;
Non-elderly Uninsured Americans: 44.8.  

Year: 2006;
Non-elderly Uninsured Americans: 47.0.  

Source: U.S. Census Bureau, Current Population Survey, 2000-2007 
Annual Social and Economic Supplements.  

Notes: Estimates for 1999-2005 were revised to reflect the results 
of a change to the survey process that assigns insurance coverage to 
dependents.  

[End of graph] 

Growth in Health Care Spending: Health Care Spending as a Percentage of 
GDP:  

[See PDF for image] - graphic text. 

This is a bar graph of the percent of health care spending as a 
percentage of GDP with the vertical axis representing percent from 0 to 
25 and the horizontal axis representing years 1975, 1985, 1995, 2005, 
and 2015.  

Year: 1975;
Health care spending: 8.1.  

Year: 1985;
Health care spending: 10.4.  

Year: 1995;
Health care spending: 13.7.  

Year: 2005;
Health care spending: 16.0.  

Year: 2015;
Health care spending: 19.2.  

Source: The Centers for Medicare & Medicaid Services, Office of the 
Actuary.  

Note: The figure for 2015 is projected.  

[End of graph] 

Growth in Health Care Spending: Health Care Spending as a Percentage of 
GDP: Cumulative Growth in Real Health Care Spending Per Capita and Real 
GDP Per Capita, 1960-2005: 

[See PDF for image] - graphic text. 

This is a line graph with two lines (Real health care spending per 
capita and Real GDP per capita) with the vertical axis representing 
percentage from 0 to 800 and the horizontal axis representing years 
1960 through 2005. The Real health care spending per capita line 
indicates an average annual growth rate of 4.9%, and the Real GDP per 
capita line indicates an annual growth rate of 2.3%.  

Source: GAO analysis of data from the Centers for Medicare & Medicaid 
Services, Office of the Actuary, and the Bureau of Economic Analysis.  

Note: The most current data available on health care spending per 
capita are for 2005.  

[End of graph]  

Where the United States Ranks on Selected Health Outcome Indicators:  

Outcome: Life expectancy at birth (U.S. = 77.8 years in 2004); 
Rank: 23 out of 30 in 2004. 

Outcome: Infant Mortality (U.S. = 6.8 deaths in 2004); 
Rank: 26 out of 30 in 2004.  

Outcome: Potential Years of Life Lost( U.S. = 5,066 in 2002); 
Rank: 23 out of 26 in 2002.  

Source: OECD Health Data 2006 and 2007.  

Notes: Data are the most recent available for all countries. Life 
expectancy at birth for the total population is estimated by the OECD 
Secretariat for all countries, as the unweighted average of the life 
expectancy of men and women. Infant mortality is measured as the number 
of deaths per 1,000 live births. Potential years of life lost (PYLL) is 
the sum of the years of life lost prior to age 70, given current age-
specific death rates (e.g., a death at 5 years of age is counted as 65 
years of PYLL).  

[End of table] 

Key Dates Highlight Long Term Challenges of the Medicare Program:  

Date: 2007;
Event: Medicare Part A outlays exceed cash income
Date: 2007; 
Event: Estimated trigger date for “Medicare funding warning;”
Date: 2013; 
Event: Projected date that annual “general revenue funding” 
for Part B will exceed 45 percent of total Medicare outlays;
Date: 2019; 
Event: Part A trust fund exhausted, annual income sufficient 
to pay about 80% of promised Part A benefits. 

Source: 2007 Annual Report of The Boards of Trustees of the The 
Federal Hospital Insurance and Federal Supplementary Medical Insurance 
Trust Funds (Washington, DC, April 2007). 

Issues to Consider in Examining Our Health Care System: 

* The public needs to be educated about the differences between wants, 
needs, affordability, and sustainability at both the individual and 
aggregate level. 

* Ideally, health care reform proposals will: 
- Align Incentives for providers and consumers to make prudent 
decisions about the use of medical services; 
- Foster Transparency with respect to the value and costs of care, and; 
- Ensure Accountability from insurers and providers to meet standards 
for appropriate use and quality. 

* Ultimately, we need to address four key dimensions: access, cost, 
quality,and personal responsibility.

Selected Potential Health Care Reform Approaches:  

Reform Approach: Revise the government’s payment systems and leverage 
its purchasing authority to foster value-based purchasing for health 
care products and services; 
Short-term action: [check]; 
Long-term action: [empty]. 

Reform Approach: Consider additional flexibility for states to serve as 
models for possible health care reforms; 
Short-term action: [check]; 
Long-term action: [empty].  

Reform Approach: Consider limiting direct advertising and allowing 
limited importation of prescription drugs; 
Short-term action: [check]; 
Long-term action: [empty].  

Reform Approach: Foster more transparency in connection with health 
care costs and outcomes; 
Short-term action: [check]; 
Long-term action: [empty].  

Reform Approach: Create incentives that encourage physicians to utilize 
prescription drugs and other health care products and services 
economically and efficiently. 
Short-term action: [check]; 
Long-term action: [empty].  

Reform Approach: Foster the use of information technology to increase 
consistency, transparency, and accountability in health care; 
Short-term action: [check]; 
Long-term action: [empty].  

Reform Approach: Encourage case management approaches for people with 
chronic and expensive conditions to improve the quality and efficiency 
of care delivered and avoid inappropriate care. 
Short-term action: [check]; 
Long-term action: [empty].  

Reform Approach: Reexamine the design and operational structure of the 
nation’s health care entitlement programs—Medicare and Medicaid, 
including exploring more income-related approaches; 
Short-term action: [check]; 
Long-term action: [check]. 

Reform Approach: Revise certain federal tax preferences for health care 
to encourage more efficient use of health care products and services; 
Short-term action: [check]; 
Long-term action: [check]. 

Reform Approach: Foster more preventative care and wellness services 
and capabilities, including fighting obesity and encouraging better 
nutrition; 
Short-term action: [check]; 
Long-term action: [check]. 

Reform Approach: Promote more personal responsibility in connection 
with health care; 
Short-term action: [check]; 
Long-term action: [check]. 

Reform Approach: Limit spending growth for government-sponsored health 
care programs (e.g., percentage of the budget and/or economy); 
Short-term action: [empty]; 
Long-term action: [check]. 

Reform Approach: Develop a core set of basic and essential services. 
Create insurance pools for alternative levels of coverage, as 
necessary; 
Short-term action: [empty]; 
Long-term action: [check]. 

Reform Approach: Develop a set of evidence-based national practice 
standards to help avoid unnecessary care, improve outcomes, and reduce 
litigation; 
Short-term action: [empty]; 
Long-term action: [check]. 

Reform Approach: Pursue multinational approaches to investing in health 
care R&D; 
Short-term action: [empty]; 
Long-term action: [check]. 

[End of table] 

Moving the Debate Forward: 

The Sooner We Get Started, the Better: 

* The miracle of compounding is currently working against us; 

* Less change would be needed, and there would be more time to make 
adjustments: 

* Our demographic changes will serve to make reform more difficult over 
time. 

Need Public Education, Discussion, and Debate: 

* The role of government in the 21st Century; 

* Which programs and policies should be changed and how; 

* How government should be financed. 

These Challenges Go Beyond Numbers and Dollars—It’s About:  
Values and People. 

Three Key Illnesses:  

* Myopia; 
* Tunnel Vision; 
* Self-Centeredness.  

Four National Deficits:  

* Budget; 
* Balance of Payments; 
* Savings; 
* Leadership.  

Five Leadership Attributes Needed for These Challenging and Changing 
Times:  

* Courage; 
* Integrity; 
* Creativity: 
* Stewardship: 
* Partnership. 

Three Key Groups That Need to Increase Their Influence and Involvement: 

* The Business and Professional Community; 

* Young Americans: 

* The Media

[End of presentation] 

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