CONGRESSIONAL BUDGET OFFICE Douglas W. Elmendorf, Director U.S. Congress Washington, DC 20515 July 25, 2009 Honorable Steny H. Hoyer Majority Leader U.S. House of Representatives Washington, DC 20515 Dear Mr. Leader: As you requested, the Congressional Budget Office (CBO) has analyzed some possible approaches for giving the President broad authority to make changes in the Medicare program. Under those approaches, any changes the President decided to implement would be based on recommendations from an advisory council and subject to Congressional disapproval. Expanding the authority of the President to effect change in the Medicare program might lead to significant long-term savings in federal spending on health care. The available evidence implies that a substantial share of spending on health care contributes little, if anything, to the overall health of the nation. Therefore, experts generally agree that changes in government policy have the potential to significantly reduce health care spending—for the nation as a whole and for the federal government in particular—without harming people’s health. However, achieving large reductions in projected spending would require fundamental changes in the financing and delivery of health care. Considerable consensus exists among experts about the types of changes that are likely to make the health sector more efficient: moving away from a fee-for- service system toward one that pays providers for value, perhaps through fixed payments per patient, bonuses based on performance, or penalties for substandard care; providing stronger incentives for both providers and patients to control costs, through higher cost-sharing requirements or tighter management of benefits; and facilitating good decisionmaking on the part of providers and patients by equipping them with more information about the effectiveness of different treatments and the quality of care delivered by different providers. Those changes in the flow of money and information would spur and facilitate other changes in the organization and delivery of health care. To ensure that current legislation puts the federal budget on a more sustainable path will probably require creating a framework for federal health care spending www.cbo.gov
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