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CBO — Comparing the Costs of the Veterans’ Health Care System with Private-Sector Costs

December 10, 2014 Comments off

Comparing the Costs of the Veterans’ Health Care System with Private-Sector Costs
Source: Congressional Budget Office

Legislation enacted in 2014 calls for the Veterans Health Administration (VHA) to expand the availability of health care to eligible veterans. That legislation provided temporary funding to expand VHA’s capacity to deliver care and to increase the amount of care purchased from the private sector.

CBO has conducted a limited examination of how the costs of health care provided by VHA compare with the costs of care provided in the private sector. Although the structure of VHA and published studies suggest that VHA care has been cheaper than care provided by the private sector, limited evidence and substantial uncertainty make it difficult to reach firm conclusions about those relative costs or about whether it would be cheaper to expand veterans’ access to health care in the future through VHA facilities or the private sector. Uncertainty about relative costs in the future is compounded by uncertainty about how VHA would structure contracts with private-sector providers.

This report briefly describes some of the features that distinguish the health care system run by VHA from health care provided in the private sector. It also examines the available evidence about the relative costs of VHA and private-sector care and explores possible reasons why costs might differ in the two settings and why they can be difficult to compare. Finally, CBO briefly considers some factors that could influence the cost-effectiveness of alternative means of expanding health care services to veterans in the future.

CBO — The Economic and Budgetary Effects of Producing Oil and Natural Gas From Shale

December 10, 2014 Comments off

The Economic and Budgetary Effects of Producing Oil and Natural Gas From Shale
Source: Congressional Budget Office

Recent advances in combining two drilling techniques, hydraulic fracturing and horizontal drilling, have allowed access to large deposits of shale resources—that is, crude oil and natural gas trapped in shale and certain other dense rock formations. As a result, the cost of that “tight oil” and “shale gas” has become competitive with the cost of oil and gas extracted from other sources. Virtually nonexistent a decade ago, the development of shale resources has boomed in the United States, producing about 3.5 million barrels of tight oil per day and about 9.5 trillion cubic feet (Tcf) of shale gas per year. Those amounts equal about 30 percent of U.S. production of liquid fuels (which include crude oil, biofuels, and natural gas liquids) and 40 percent of U.S. production of natural gas. Shale development has also affected the federal budget, chiefly by increasing tax revenues.

The production of tight oil and shale gas will continue to grow over the next 10 years—by about 30 percent and about 60 percent, respectively, according to a recent projection by the Energy Information Administration (EIA). Another EIA estimate shows that the amount of tight oil and shale gas in the United States that could be extracted with today’s technology would satisfy domestic oil consumption at current rates for approximately 8 years and domestic gas consumption for 25.

CBO — Growth in DoD’s Budget From 2000 to 2014

November 21, 2014 Comments off

Growth in DoD’s Budget From 2000 to 2014
Source: Congressional Budget Office

The Department of Defense’s (DoD’s) base budget grew from $384 billion to $502 billion between fiscal years 2000 and 2014 in inflation-adjusted (real) terms—an increase of 31 percent and an annual average growth rate of 1.9 percent (see figure below). Several factors contributed to that growth. The largest rate of growth was in the costs for military personnel, which increased by 46 percent over the period. The costs for operation and maintenance (O&M) increased by 34 percent, and the costs for acquisition increased by 25 percent. About two-thirds of the $117 billion real increase in the budget went for the following activities: procurement; O&M costs for the Defense Health Program; research, development, test, and evaluation; the basic allowance for housing; fuel; and basic pay for active-duty military personnel (see table below).

For this analysis, CBO examined DoD’s base budget, which excludes supplemental and emergency funding for overseas contingency operations (those conducted in Afghanistan and Iraq and other countries). DoD’s base budget includes both discretionary funding (controlled by annual appropriation acts) and mandatory funding (generally determined by eligibility rules, benefit formulas, and other parameters that are set in current law). All costs are expressed in 2014 dollars of budget authority, adjusted for the effects of inflation over the 15-year period using the gross domestic product price index; unless otherwise noted, all growth rates are measured in those real terms. CBO’s analysis is based on data from DoD. In addition, CBO relied on analyses described in several of its publications.

CBO — Options for Reducing the Deficit: 2015 to 2024

November 21, 2014 Comments off

Options for Reducing the Deficit: 2015 to 2024
Source: Congressional Budget Office

The Congress faces an array of policy choices as it confronts the prospect of large annual budget deficits and further increases in the already-large government debt that are projected to occur in coming decades under current law. To help inform lawmakers about the budgetary implications of changing federal policies, CBO periodically issues volumes of policy options and their effects on the federal budget, of which this is the most recent. The agency also issues separate reports that present policy options in particular areas.

This document provides estimates of the budgetary savings from 79 options that would decrease federal spending or increase federal revenues over the next decade. The estimates are updates of many of those presented in Options for Reducing the Deficit: 2014 to 2023 (November 2013). The options cover a broad range of areas in the federal budget, including defense, energy, Social Security, health care programs, other benefit programs, and provisions of the tax code. The budgetary effects identified for most of the options span the 10 years from 2015 to 2024 (the period covered by CBO’s baseline budget projections in 2014), although many of the options would have longer-term effects as well. This document presents options in the following categories:

  • Mandatory spending other than that for health-related programs,
  • Discretionary spending other than that for health-related programs,
  • Revenues other than those related to health, and
  • Health-related programs and revenue provisions.

For each option, this document includes a brief description of the policy involved.

CBO — Federal Policies and Innovation

November 19, 2014 Comments off

Federal Policies and Innovation
Source: Congressional Budget Office

Innovation is a central driver of economic growth in the United States. Workers become more productive when they can make use of improved equipment and processes, and consumers benefit when new goods and services become available or when existing ones become better or cheaper—although the transition can be disruptive to established firms and workers as new products and processes supersede old ones. Looking ahead, innovation will continue to be important for economic growth, in part because the supply of workers to the economy is expected to increase at a much slower rate in the future.

Innovation produces some benefits for society from which individual innovators are not able to profit, and, as a result, those innovators tend to underinvest in such activity. Policymakers endeavor to promote innovation to compensate for that underinvestment. The federal government influences innovation through two broad channels: spending and tax policies, and the legal and regulatory systems. In this report, the Congressional Budget Office (CBO) examines the effects on innovation of existing policies and systems and the possible effects of a variety of proposals for changing those policies and systems.

CBO — Medicare’s Payment to Physicians

November 17, 2014 Comments off

Medicare’s Payment to Physicians
Source: Congressional Budget Office

On October 31, 2014, the Centers for Medicare and Medicaid Services (CMS) issued a final rule in which CMS announced the update to the conversion factor update for the Physician Fee Schedule (PFS) under Medicare will be a reduction of 21.2 percent for services furnished during calendar year 2015.

Following long-standing practice, CBO will incorporate that information in its next regular baseline update. It will also immediately take that information into account when analyzing legislation being considered by the Congress.

The table, Medicare’s Payment to Physicians: the Budgetary Effects of Alternative Policies, includes estimates for several replacement and short-term alternatives to the current rules for setting Medicare’s payment rates for physicians’ services. The starting date for all of these alternative policies would be April 1, 2015.

CBO — The Distribution of Household Income and Federal Taxes, 2011

November 17, 2014 Comments off

The Distribution of Household Income and Federal Taxes, 2011
Source: Congressional Budget Office

In 2011, according to CBO’s estimates, average household market income—a comprehensive income measure that consists of labor income, business income, capital income (including capital gains), and retirement income—was approximately $81,000. Government transfers, which include benefits from programs such as Social Security, Medicare, and unemployment insurance, averaged approximately $13,000 per household. The sum of those two amounts, which equals before-tax income, was about $94,000, on average. Federal taxes as examined in this report comprise four separate sources: individual income taxes, payroll (or social insurance) taxes, corporate income taxes, and excise taxes. Taken together, those taxes were about $17,000 per household, on average, in 2011. Thus, average household income after taxes was about $77,000, and the average federal tax rate (federal taxes divided by before-tax income) was 17.6 percent.

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