CBO projects that healthcare costs will account for nearly half of the U.S. economy by 2082, with only about 10 percent of that increase caused by an aging population. In a first-of-its kind report on the long-term costs of health care, CBO said Medicare and Medicaid would be 19 percent of the gross domestic product, or 38 percent of total healthcare spending. CBO Director Orszag said at a morning briefing that the bulk of the projected increase in healthcare spending can be attributed to factors that do not necessarily lead to better health outcomes, such as the "open-ended adoption of new technologies that may be not that valuable."

By Fawn Johnson

CBO projects that healthcare costs will account for nearly half of the U.S. economy by 2082, with only about 10 percent of that increase caused by an aging population. In a first-of-its kind report on the long-term costs of health care, CBO said Medicare and Medicaid would be 19 percent of the gross domestic product, or 38 percent of total healthcare spending. CBO Director Orszag said at a morning briefing that the bulk of the projected increase in healthcare spending can be attributed to factors that do not necessarily lead to better health outcomes, such as the "open-ended adoption of new technologies that may be not that valuable." Orszag said some members of CBO's team of healthcare analysts have said that as much as half of costs could be removed without changing results; others estimate a
smaller amount. Orszag said changing healthcare policy to achieve 30 percent savings borders on impossible but said it is a worthwhile endeavor. "There is a significant opportunity to remove costs from the system without harming health outcomes," he said. Referring to the 30 percent figure, he said. "That's 5 percent of the GDP. ... That is a very substantial amount of money."

Orszag said a range of options need to be explored over the long term to reduce costs, including health information technology and rarely available "comparative effectiveness" studies that gauge different treatments. Orszag said he hoped to encourage long-term thinking by expanding his healthcare staff and devoting more of CBO's resources to health studies. Before his term ends in 2011, he said CBO will produce a series of reports on "options and levers on what we can do to reduce costs." He also said federal funding of nongovernment research could go a long way toward producing data that can offer a guide to how best to manage patients in cost-effective ways. The CBO reports will take up care coordination, disease management, and financial incentives. Financial incentives for providers, dubbed "pay for performance," will be among the mix of policies that could push costs down, Orszag said, adding that Medicare and Medicaid policies could influence the entire health system. But, he cautioned, any changes will be slow, and some proposals will be controversial. For example, Orszag said the unexplained differences in healthcare costs in areas of the country probably result from differences in "social norms among physicians" -- i.e., physicians in some areas tend to use expensive diagnostics such as MRIs more than those in other areas, with no visible difference in health outcomes. "These are things that are very difficult to change," he said.