November, 2008

The enormous budget deficits projected for future years have the starring role in the documentary IOUSA (see CEPR's analysis of the film). However, the simple fact that the film conceals is that these scary deficits are driven almost entirely by projections of exploding private sector health care costs.

The government pays for approximately half of the country's private sector health care through programs like Medicare and Medicaid. Therefore, if the projections of exploding private sector health care costs prove accurate, then the government will face a serious deficit problem. However, if health care costs can be contained, then the budget problems are easily manageable.

CEPR's Health Care Cost-Adjusted IOUSA Deficit Calculator allows you to see what the projected U.S. budget deficit would be, as a percentage of GDP, if the United States had the same per person health care costs as any of the countries in the list below, all of which enjoy longer life expectancies than the United States. All of the other budget assumptions are the ones used by the Congressional Budget Office (CBO), which form the basis for the scary deficit numbers in IOUSA. Each country is listed with its life expectancy in parentheses.

The yellow line shows the baseline deficit projection from the non-partisan CBO. The default box checked for the United States shows CBO's "Low Health Care Cost" projection (blue line), which assumes that health care costs rise only due to the aging of the population, but otherwise stay even with per capita GDP growth.

Sources: Congressional Budget Office, The Long-Term Budget Outlook, December 2007 and World Bank, World Development Indicators.


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