Chronic Deficit: Entitlement Crisis? or Health Financing Problem? Henry J. Aaron Bruce and Virginia MacLaury Senior F

1. Chronic Deficit: Entitlement Crisis? or Health Financing Problem? Henry J. Aaron Bruce and Virginia MacLaury Senior Fellow The Brookings Institution

2. The prevailing ‘expert’ view A “monster at the door.” Robert Samuelson A fiscal cancer, “massive entitlement programs we can no longer afford, exacerbated by a demographic glitch that began more than 60 years ago David Walker “...a government in desperate trouble. It’s raising taxes sky high, drastically cutting retirement and health benefits, slashing defense, education, and other critical spending, and borrowing far beyond its capacity to repay.” Laurence Kotlikoff and Scott Burns

3. What Projections Really Show (1)

4. What Projections Really Show (2)

5. The message… …the fiscal problem is entirely a health care financing problem …since taxes are assumed to remain a constant share of GDP, projections show no otherlong-term budgetproblem …because public and private health care spending move together, there is also a private health care financing problem

9. The morals of this story… • There isa long term fiscal problem; all of it is health care 2. There is no entitlement crisis other than health care 3. There is an equally urgent private budget problemalso stemming from increasing health care spending 4. These problems are important for three reasons: fiscal balance, consumption growth, and health care access and affordability • There is no practical way to deal with public health care • spending other than by general health care financing reform