declines in mortality affect the ratio of workers to beneficiaries. It is another thing entirely to look beyond that at the age pattern of health care costs. The costs are far higher at older ages, and that raises an interesting question: With longer life expectancy and more people living to older ages, will the future elderly have the same pattern of health care costs as today’s elderly, or will their costs be more similar to today’s younger beneficiaries of the Medicare program? The OACT has started to explore this issue based on a suggestion from David Cutler (Harvard University) to look at expenditures for survivors in a year versus decedents in a year as a gross approximation of health status. Progress was made in this effort, but the project eventually had to be put aside because of resource constraints.
Jonathan Skinner (Dartmouth College) questioned the role of taxes as a constraint on growth in health care spending. One of the things he and his colleagues found is that countries seem to bump up against tax constraints at about 40 percent of GDP. They do not like to tax more than that. Denmark and Sweden, which have very high tax rates to begin with, have held the line on health care spending in terms of keeping their growth in spending during the last 30 years to 1 or 2 percentage points of GDP increase, unlike the United States, where health care costs are growing at much faster rates. Have there been any thoughts in this country about constraining health care cost growth by holding the line for collecting no more than 40 percent of GDP in taxes?
Foster remarked that the OACT has had some interesting discussions along those lines. What is a tolerable or sustainable level of revenue collection? A few years ago, there was a rash of models developed by others about the long-term growth of government spending, and many of these ended up projecting unrealistic high levels.
Some of the questions raised in this session about the constraints imposed by assuming current law in cost projections and what brakes could be put on health care spending were also discussed in the next session (see Chapter 3).