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
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
