![]() Budget estimates become even more uncertain the farther they go into the future. In this study, uncertainty arises from the inherent challenges in making budget projections under current law and from the many estimates of the effects of an increase in the cigarette tax that CBO produced in its statistical analyses and distilled from the research literature. The magnitude of those countervailing effects could vary for different health care programs.Īt the same time, improvements in health would increase outlays for programs that pay benefits to retired people (such as the retirement portion of Social Security) as greater longevity increased the number of people collecting benefits.Ī reduction in smoking could also increase people’s earnings and hence the amount of federal revenues collected from income and payroll taxes.Įstimating the budgetary impact of federal policies that affect the health of the population inevitably involves considerable uncertainty. But to the extent that better health led to greater longevity, the number of beneficiaries of federal health care programs-and thus the programs’ costs-might rise. To the extent that better health reduced annual health care spending per capita, the costs of federal health care programs (including Medicare, Medicaid, and various smaller health care programs) might be lower than they would be otherwise. To produce comprehensive estimates of the budgetary effects of such a policy, CBO must assess the magnitude of each of those complex links. The implications of improvements in health for people’s health care spending, life expectancy, and earnings.The impact of changes in behavior on people’s health, and. ![]() ![]() The effects of the policy on people’s behavior,.Through What Channels Could Policies to Improve Health Affect the Budget?īesides any direct impact on revenues and spending, a policy that aimed to improve health could affect the federal budget indirectly through the following links: Of course, if lawmakers were to consider raising that federal excise tax-or adopting other policies that would promote a healthier population-their decisions would most likely depend on various considerations besides the effects on the federal budget. Specifically, CBO analyzed the budgetary effects of a hypothetical increase of 50 cents per pack in the federal excise tax on cigarettes and small cigars (from $1.01 to $1.51 in fiscal year 2013, with the increase adjusted each year to keep pace with inflation and, in the long term, with the growth of people’s income). This study uses a policy to discourage smoking as an example for estimating the overall impact on the federal budget of a policy intervention to improve health. The federal government spends roughly $1 trillion on health care programs each year, so it is easy to imagine that policies that promote a healthier population could have a significant impact on the federal budget. ![]()
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