The FY15 Budget: There’s More to it Than the Numbers

Paul KeckleySaturday, the U.S. Senate passed the House-sponsored Omnibus Appropriation Bill that funds the federal government through September 2015. In all likelihood, all eyes weren’t glued to these proceedings, perhaps otherwise attentive to holiday shopping or the events around nationwide protests about policing in our cities.

Healthcare is a huge part of the federal budget: combining spending for Medicare, Medicaid, Children Health Insurance Program (CHIP), military and veterans’ health, Indian Health Services and federal employee health benefits, it represents 35% of the total $3.9 trillion budget. For the decade prior to the economic downturn, total health spending increased 7.2% annually. During the downturn, it slowed to less than 4% but is expected to increase to 6% annually for the decade ahead. That means healthcare spending will be an even bigger part of federal budgets going forward.

Examination of the federal budget sounds about as exciting as a trip to the dentist. Digging deeply into these numbers related to healthcare is tedious and boring. It’s simpler to think in terms of what we spend: $9,255 per person—well above what any other country in the world spends. But it’s more complicated than that – we spend more for the elderly and sickest than the young and healthy. Those with employer-sponsored health insurance pay more for the same service compared to those covered by a government plan like Medicaid or Medicare. Spending for those lacking insurance is paid by everyone else and the complicated way we structure transactions in our system- co-pays, deductibles, out-of-pocket, covered/not covered, in-network/out of network, exchanges and health insurance marketplaces, Medicare Part A/B/C/D, et al – confounds understanding even for the most cerebral among us.

For the vast majority, then, understanding the health system and what we spend for healthcare is an abstract: our out-of-pocket spend is what we know, and even that’s hard to budget for or understand.

The federal budget is now put to bed for 2015 and we can move on. But we shouldn’t lose sight of the reality that in that budget, and for years to come, healthcare will increase, dwarfing defense, social security as our biggest spending category. Spending by the federal government and by states for healthcare will include coverage for increasingly greater numbers of our citizens: from 159 million of us today (50% of our total population) to many more in years ahead as we age into Medicare and insure more thru Medicaid and subsidized private insurance.

But the bigger story beneath these budget numbers is the elephant in the room. Can we sustain this level of spending today and tomorrow, or does something have to give? Proponents for reform say “no” but can’t agree on the fix. Defenders of the status quo claim the benefits far outweigh the costs. And in the end, spending increases continue and solutions to obvious flaws get mired in the politics of the moment.

It’s time for a national discussion about the health system we need, want and can afford for our future. That’s the story beneath the new federal budget numbers.

Paul Keckley, PhD is managing director of Navigant’s health care practice.