Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches
description
Transcript of Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches
![Page 1: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/1.jpg)
Projecting Long-Range Aggregate Health Expenditures:
OACT, CBO, and SOA Approaches
Presentation by:Todd Caldis, Ph.D., J.D.
Senior EconomistNational Health Statistics Group, CMS\OACT
September 18, 2009
The Middle Atlantic Actuarial Club
![Page 2: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/2.jpg)
Introduction
• The long-range projection challenge
• Examine and compare the three principal approaches in use for projecting long-range health expenditures
• General observations (brief)
• Questions and discussion
![Page 3: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/3.jpg)
The Projection Task
• CMS, Office of the Actuary (OACT)
• Congressional Budget Office (CBO)
• Society of Actuaries (SOA)
![Page 4: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/4.jpg)
The Projection Problem
• Almost uninterrupted trend of health sector growth faster than the growth of our overall economy
• Growth can’t go on forever---an economy devoted only to health care can’t exist
![Page 5: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/5.jpg)
Health Sector Growth
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004
NHE Share
of GDP(%)
Year
Chart 1 - National Health Expenditures (NHE) as a Percentageof Gross Domestic Product (GDP)
1960-2007
Source: Centers for Medicare & Medicaid Services, Office of the Actuary
![Page 6: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/6.jpg)
International Comparisons
AustraliaAustria
BelgiumCanada
Czech Republic
Denmark
Finland
FranceGermany
GreeceHungary
Iceland
Ireland
ItalyJapan
KoreaLuxembourg
Mexico
Netherlands
New ZealandNorway
Poland
Portugal
Slovak Republic
SpainSweden
Switzerland
Turkey
United Kingdom
United States
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Share of
GDP (%)
Chart 2 - Total Expenditures on Health as a Percentage Share of GDP,OECD Countries, 2006
Source: OECD Health Data 2008.Note: For the United States the 2006 data reported here do not match the 2006 data point for the United States in Chart 1 since the OECD uses a slightly different definition of "total expenditures on health" than that used in the National Health Expenditure Accounts.
![Page 7: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/7.jpg)
Excess Cost Growth TrendsTable 1 - Average excess cost growth rates, selected time periods 1975-2007
NHE (rounded) GDP (rounded)
Periods beginning with 1975:
through 1980 (5 years) 4.5% 2.7% 1.8%through 1985 (10 years) 4.6% 2.5% 2.2%through 1990 (15 years) 4.9% 2.4% 2.5%through 1995 (20 years) 4.5% 2.1% 2.4%through 2000 (25 years) 4.2% 2.3% 1.9%through 2007 (32 years) 4.0% 2.1% 1.9%
Periods beginning with 1980:
through 1985 (5 years) 4.8% 2.3% 2.5%through 1990 (10 years) 5.1% 2.3% 2.9%through 1995 (15 years) 4.5% 1.9% 2.6%through 2000 (20 years) 4.1% 2.2% 1.9%through 2007 (27 years) 3.9% 2.0% 1.9%
Periods beginning with 1985:
through 1990 (5 years) 5.5% 2.3% 3.3%through 1995 (10 years) 4.4% 1.8% 2.6%through 2000 (15 years) 3.9% 2.2% 1.7%through 2007 (22 years) 3.7% 1.9% 1.8%
Periods beginning with 1990:
through 1995 (5 years) 3.3% 1.3% 2.0%through 2000 (10 years) 3.1% 2.2% 0.9%through 2007 (17 years) 3.2% 1.8% 1.4%
Periods beginning with 1995:
through 2000 (5 years) 2.9% 3.1% -0.2%through 2007 (12 years) 3.1% 2.1% 1.1%
Periods beginning with 2000:
through 2007 (7 years) 3.3% 1.3% 2.0%Note: NHE rates are adjusted for age-gender effects.
Source: Centers for Medicare and Medicaid Services, Office of the Actuary.
Time period Average constant-dollar, per capita growth Average Excess
Cost Growth Rate
![Page 8: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/8.jpg)
The Projection Challenge
• Health sector can’t grow faster than the economy forever---so it won’t.– Cannot project off of historic growth trends
alone in the long-run
• But when, how, and at what rate will excess cost growth slow down?– What evidence to rely on
![Page 9: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/9.jpg)
Method #1: OACT Excess Cost Growth Model
• The first excess cost growth projection model
• Result of an evolution that started in the late 1990s
• Uses a core assumption about the average rate of excess cost growth for the last 51 years of the 75-year horizon
• More complicated modeling apparatus brought in to refine the assumption into its finished form
![Page 10: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/10.jpg)
Projection from a Current Law Perspective
• Idea of a policy-neutral baseline, the state of the world if specified existing policies remained unchanged.
• A perspective that characterizes much of OACT’s work
• For long-term projections the state of the world if benefits now promised are maintained– Assumes that revenue to pay benefits would
and could be found
![Page 11: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/11.jpg)
Basic Formulas: Definition of Excess Cost Growth
• Difference of growth factors(algebraically equivalent to a difference of rates):
• Health expenditures and Age-Gender are per enrollee; GDP is per capita.
![Page 12: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/12.jpg)
Basic Formulas: The Excess Cost Ratio
• The XRatio can be thought of an excess cost growth factor.
![Page 13: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/13.jpg)
A Projection Formula
• Can implement with aggregate expenditures in the formula if also include a population factor in the equation:
![Page 14: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/14.jpg)
The Core Excess Growth Assumption: GDP+1
• Assumption that average per enrollee, age-gender adjusted rate of health expenditure growth will exceed per capita rate of GDP growth by 1% for the years 25 through 75 of the projection horizon.– If GDP growth is 5% and age-gender adjusted
health expenditure growth will be 6%, a percentage point more
• Can be implemented with either nominal or real GDP
![Page 15: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/15.jpg)
Implementing the Method for a 75 Year Horizon
• Years 1 -10 determined by OACT short-run projections.
• Years 11 – 25 based on straight-line transition from excess cost ratios for year 10 to the consolidated excess cost ratios for year 25.
• Years 25 – 75 projections based upon excess cost ratios generated from the CMS Computable General Equilibrium (CGE) Model.
![Page 16: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/16.jpg)
Generating Long-Range Excess Cost Ratios (Years 25 – 75)
• OACT CGE Model– A Ramsey-type model optimizing for a
representative agent– Incorporates assumptions about technological
change and costs effects for the health sector
• CGE solved for a time series of excess cost ratios whose resulting Part A actuarial balance is financially equivalent to the cumulative 75 year balance under a linear GDP + 1 excess cost growth rate
![Page 17: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/17.jpg)
History of the GDP + 1 Excess Cost Growth Assumption
• Until 2001 projections in Trustees Reports implicitly based upon a “GDP + 0” assumption of no excess cost growth for projection year 26 forward.
• Pure “GDP + 1” implemented in 2001 based upon recommendations of the 2000 Technical Review Panel for projection year 26 forward.
• “GDP + 1” affirmed as “within the range of reasonable assumptions” by 2004 Technical Review Panel.
• Refined GDP +1 with OACT CGE “smoothing” implemented starting with 2006 Medicare Trustees Report.
![Page 18: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/18.jpg)
Thinking About “GDP + 1”
• Based upon expert consensus. • Reflects expectation of a substantial slowdown
in historic rates of excess cost growth.• Reflects belief that technological change will
remain an important driver of excess cost growth for most of the 75 year projection horizon.
• An understandable and discussable core assumption
![Page 19: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/19.jpg)
The Idea of “Natural Brakes”
• Rationale that reconciles idea of a spending slowdown with current law
– Cost sharing provisions in current law Medicare
– Diffusion of cost-saving practice patterns (Spillover)
![Page 20: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/20.jpg)
Method #2: CBO’s Excess Cost Growth Model
• First long-term projection using this method appeared in November, 2007 in “The Long-Term Outlook for Health Care Spending”
• The same framework was employed with modified assumptions for CBO’s most recent long-term health expenditure projections released in June, 2009
• Like OACT, CBO projects from a current law perspective
![Page 21: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/21.jpg)
CBO’s Disaggregated View of Excess Cost Growth
1976 1980 1984 1988 1992 1996 2000 2004
-10
-5
0
5
10
15
20
Total Medicare
Medicaid
Other
Source: Congressional Budget Office, The Long-Term Outlook for Health Care Spending, November 2007.
![Page 22: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/22.jpg)
CBO’s Basic Projection Formula
Source: The Long-Term Outlook for Health Care Spending (CBO: November, 2007)
![Page 23: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/23.jpg)
CBO’s Excess Cost Growth: The Definition of xt
Source: The Long-Term Outlook for Health Care Spending (CBO: November, 2007)
![Page 24: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/24.jpg)
Relation between CBO and OACT Excess Cost Growth
• A conceptual connection useful for comparing CBO and OACT approaches
• In practice OACT has a single series of Xratios applicable to all parts of the US health sector; CBO has three series related to each other, but distinct, each series being applicable to a different part of the US health sector
![Page 25: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/25.jpg)
Other OACT/CBO Similarity
![Page 26: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/26.jpg)
CBO’s Disaggregated Excess Cost Growth Projection Method
• Projects excess cost growth for the US health sector partitioned into Medicare, Medicaid, and Non-Medicare, Non-Medicaid
• For each part of the health sector implements different initial rate of excess cost growth-measure of historic average
• Beginning in the 12th year of the 75-year projection period each part’s rate of excess cost growth begins decelerating
![Page 27: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/27.jpg)
“Identification” of CBO’s Projection
• Assumption about interconnection across the three parts of the health sector of the rate of excess cost growth deceleration– In 2007 Medicare and Medicaid assumed at 25% and
75% of the rate of deceleration in Non-Medicare, Non-Medicaid
– In 2009 Medicare assumed to decelerate at 1/3 the rate of NMNM; Medicaid at the same rate as NMNM
• Choose an NMNM deceleration rate such that real per capita Non-Health personal consumption expenditure is always non-negative (No recomputation in 2009)
![Page 28: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/28.jpg)
CBO’s Deceleration Factors
• For 2007 projection, the excess cost growth rate decelerated at 4.6% per year for NMNM, 3.45% per year for Medicaid, and 1.15%
• 2009 projection assumed that NMNM would continue to decelerate at approximately the same rate as in the 2007 projection, 4.5% per year and changed the assumed connection with deceleration elsewhere
– Medicaid at same deceleration rate as NMNM, 4.5%
– Medicare decelerating at one-third the rate of NMNM, 1.5% per year.
• Remember---deceleration refers to deceleration of the rate of excess cost growth unique to each of the three parts of the health sector
![Page 29: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/29.jpg)
Other Aspects of CBO Long-Range Health Expenditure Projection
• For the first 10 years uses short-range projections where available (e.g. Medicare); for other parts of health sector otherwise assumes that historic rate of ECG prevails
• For year 11 of the projection period each part of the health sector assumed to be at its historic average rate of ECG
– 2007: 2.4% (Care), 2.2% (Caid), 2.0% (NMNM)– 2009: 2.3% (Care), 1.9% (Caid), 1.8% (NMNM)
• Deceleration of ECG in each part of health sector starting in year 12.• NMNM nominally includes Medicare-related and Medicaid-related items
– E.g. State Medicaid share and Medicare OOP– CBO makes assumptions to pull such items out of NMNM, compute
NMNM growth without them, grow the removed items at the same rates as Medicare or Medicaid, and then recombines the removed items with the rest of NMNM
![Page 30: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/30.jpg)
CBO’s Theory of ECG Slowdown
• Assumes no change in federal policy, i.e., current law
• Private sector flexibility to respond to cost pressures
• State laws may change– Medicaid program therefore more able to
respond to cost pressure than Medicare but less able than private sector
• Assumes spillover effects in practice norms and pricing
![Page 31: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/31.jpg)
Comparison of OACT and CBO Methods
• Results are driven by substantively different assumptions about rates of excess cost growth
• Reflect different views of how current law would play out into the future
• Mechanical implementations are different and raise issues of method unique to each model
![Page 32: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/32.jpg)
Comparison of ECG Assumptions
Source: Centers for Medicare and Medicaid Services, Office of the Actuary
![Page 33: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/33.jpg)
Effect of Excess Rate Assumptions on Projections
![Page 34: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/34.jpg)
Method #3: Getzen-Society of Actuaries (SOA)
• Released in 2007 under auspices of the Society of Actuaries
• Constructed by Professor Thomas Getzen under contract with SOA and in close consultation with a working group of actuaries
• Intended as a tool for evaluating retirement health benefit plans; base scenario with allowance user discretion in choice of inputs
• Allows fast excess cost growth to continue until NHE attains a prescribed share of GDP or a specified limit year is reached
![Page 35: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/35.jpg)
Required Inputs
• Per capita rate of real income growth (Income%)• Income elasticity, rate at which real income growth
converts into increased demand for health care (IncElas: A constant)
• Per capita rate at which technology and other factors contribute to increased demand for health care (Tech%: A percentage independent of income growth)
• Baseline Health Sector Share of GDP in 2011(ShareBase
• Average CPI (appears to affect nominal but not real action in the model)
![Page 36: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/36.jpg)
Significance of Inputs: Fixed Annual GDP Share Increment
• Annual increment is fixed annual increment by which health sector share grows if no limits are encountered
• If ShareBase = 17.5% would reach 42.1% in 2083 and 100% of GDP in @2250.
![Page 37: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/37.jpg)
Growth Limiting Options
• Resistance Share: A user-specified health sector share of GDP (25% in baseline model)– Beyond the resistance point the annual increment
is gradually reduced.– Asymtotically health sector share can never grow
to more than twice the resistance share
• Limit Year: User-designated year beyond which the annual increment is rapidly phased to zero.
![Page 38: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/38.jpg)
Other Options
• Change parameter values in 2020-2030 and 2030+
• Playing with per person baseline medical costs
![Page 39: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/39.jpg)
SOA Outputs
• Health sector share
• Per capita income
• Per capita medical costs
• Percentage increases
![Page 40: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/40.jpg)
What’s distinctive about SOA Model?
• Annual Increment forces user to think about substantive sources of excess cost growth
• Base model (used without resistance share and limit year options) builds in gradual deceleration of excess cost growth
• Resistance Share and Limit Year options permit consideration of sudden-end scenarios
![Page 41: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/41.jpg)
Comparison of Projection Results
Comparison of Long Range Projections of National Health Expenditures
2018-2082
OACT
CBO
SOA-Getzen
0
10
20
30
40
50
60
2018 2028 2038 2048 2058 2068 2078
Year
Percentage
Share
of GDP
OACT CBO SOA-Getzen
Source: Centers for Medicare and Medicaid Services, Office of the Actuary
![Page 42: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/42.jpg)
Similarities Among All Methods
• Each based on assumptions about excess cost growth.• Each envisions a slowdown in excess cost growth.
– OACT envisions natural brakes smoothly decelerating to zero ECG in 75 years
– CBO envisions different parts of the health sector decelerating at different rates with a non-steady state at the end of 75 years
– SOA-Getzen in its unconstrained version envisions smooth deceleration of health sector growth with no steady state reached at the end of 75 years.
• Each accepts the proposition that the health sector will continue to grow despite a slowing of ECG rates
• In fact, each method projects a health sector share between 40 and 50 percent at the end of 75 years (SOA-Getzen in its unconstrained version)
• Each of these models documents the implications of assumed trend patterns better than they explain them
![Page 43: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/43.jpg)
Research Issues Common to All Projection Methods
• All need to work on strengthening the evidence supporting key assumptions about slowing ECG– OACT working with a simple insurance cost-sharing
model, also has a modest spillover project in progress, and is in contact with an NIA-funded effort to incorporate features of insurance cost-sharing provisions into the Urban Institute’s microsim
– CBO may be working long-term to incorporate insurance cost-sharing features into its CBOLT microsim
– Not aware of research through SOA; maybe someone here can comment
![Page 44: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/44.jpg)
Constraints on Development of These Methods
• OACT and CBO must produce current law projections– CL necessarily involves a scenario in which existing
program is sustained into the indefinite future– In commentary both OACT and CBO acknowledge
that the actual sustainability of their long-term scenarios is open to serious question
– In some circumstances current law scenarios are declared unsustainable.
![Page 45: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/45.jpg)
Other Development Constraints
• Professional standards
• Some stability in methods desirable; erratic swings in LT projections due solely to methodolgical brainstorms would send a confusing message
• Tension between complexity and transparency
![Page 46: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/46.jpg)
Usefulness of These Projection Methods
• Credible warnings about a long-term systemic solvency crisis that our society faces
• Would be a bonus if these methods provided insight toward solving the crisis– Bonus but not the fundamental mission
• Explanatory limits of these methods not an excuse for complacency
![Page 47: Projecting Long-Range Aggregate Health Expenditures: OACT, CBO, and SOA Approaches](https://reader031.fdocuments.net/reader031/viewer/2022020111/568147df550346895db51554/html5/thumbnails/47.jpg)
References
• Medicare Trustees Reports– http://www.cms.hhs.gov/ReportsTrustFunds/
– Has link to an official OACT memorandum about projection methodology (by Caldis)
• Congressional Budget Office– The Long-Term Outlook for Health Spending
(November, 2007)– The Long-Term Budget Outlook (June, 2007)
• Society of Actuaries– http://library.soa.org/research/health/research-hlthcare-trends.aspx