Exhibit ES-1. Synergistic Strategy: Potential Cumulative Savings Compared with Current Baseline Projection, 2013–2023

Total NHEFederal

government

State and local

governmentPrivate

employers Households

2013–2018 –$686 –$345 –$84 –$66 –$192

2013–2023 –$2,004 –$1,036 –$242 –$189 –$537

Net impact in $ billions*

Note: NHE = national health expenditures.* Net effect does NOT include potential impact of spending target policy.Source: Estimates by Actuarial Research Corporation for The Commonwealth Fund. Current baseline projection assumes that the cuts to Medicare physician fees under the sustainable growth rate (SGR) formula are repealed and basic physician fees are instead increased by 1% in 2013 and held constant from 2014 through 2023.

Exhibit ES-2. Projected National Health Expenditures (NHE), 2013–2023: Potential Impact of Synergistic Strategy

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$2.9

$5.5Current baseline NHE projection

Projected NHE net of policy impacts

NHE as percentage of GDP— Current projection: 18% in 2013→21% in 2023 Under unified strategy: 18% in 2013→19% in 2023 Cumulative NHE savings under synergistic strategy: $2.0 trillion

$5.1

Note: GDP = gross domestic product.Source: Estimates by Actuarial Research Corporation for The Commonwealth Fund. Current baseline projection assumes that the cuts to Medicare physician fees under the sustainable growth rate (SGR) formula are repealed and basic physician fees are instead increased by 1% in 2013 and held constant from 2014 through 2023.

NHE in $ trillions

Exhibit ES-3. Cumulative Net Impacts of Payment, Engaging Consumers, and Systemwide Policies, 2013–2023

2013–2018

2019–2023

Total 2013–2023

Payment reforms to pay for value to accelerate delivery system innovation

–$442 –$891 –$1,333

Policies to expand and encourage high-value choices by consumers

–$41 –$148 –$189

Systemwide actions to improve how health care markets function*

–$203 –$279 –$481

Cumulative NHE impact** –$686 –$1,318 –$2,004

Note: NHE = national health expenditures. Totals may not add because of rounding.* Net savings do NOT include the potential impact of the spending target policy. Malpractice savings included in impact of provider payment reforms.** Cumulative NHE impact adjusted for potential overlap of component policy impacts.Source: Estimates by Actuarial Research Corporation for The Commonwealth Fund. Current baseline projection assumes that the cuts to Medicare physician fees under the sustainable growth rate (SGR) formula are repealed and basic physician fees are instead increased by 1% in 2013 and held constant from 2014 through 2023.

Net savings in $ billions

Exhibit 1. International Comparison of Spending on Health, 1980–2010

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

US

SWIZ

NETH

CAN

GER

FR

AUS

UK

JPN

Average spending on healthper capita ($US PPP)

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

0

2

4

6

8

10

12

14

16

18

USNETHFRGERCANSWIZUKJPNAUS

Total health expenditures aspercent of GDP

Notes: PPP = purchasing power parity; GDP = gross domestic product.Source: Commonwealth Fund, based on OECD Health Data 2012.

4

Exhibit 2. Medicare Spending per Enrollee Projected to Increase More Slowly Than Private Insurance Spending per Enrollee and GDP per Capita

2008–2011 2011–2021 (projected)0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

2.7

3.83.7

2.9

GDP per capita

Medicare spending per enrollee

Employer-sponsored insurance spending per enrollee

4.5 4.6

Annual rate of growth (percent)

Note: GDP = gross domestic product.Source: CMS Office of the Actuary, National Health Expenditure Projections, 2011–2021, updated June 2012.

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

0

5

10

15

20

25

30

35

1213

1517

18 18 18 18 1920

22 23 24 25 26 26 27 28 29 30 31

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

0

25

50

75

100

125

150

175

200Health insurance premiums

Workers' contribution to premiums

Workers' earnings

Overall inflation

Exhibit 3. Premiums Rising Faster Than Inflation and Wages

Sources: (left) Kaiser Family Foundation/Health Research and Educational Trust, Employer Health Benefits Annual Surveys, 1999–2012; (right) authors’ estimates based on CPS ASEC 2001–12, Kaiser/HRET 2001–12, CMS OACT 2012–21.

Projected average family premium as a percentage of median family income,

2013–2021

Cumulative changes in insurance premiums and workers’ earnings,

1999–2012

Percent Percent

180%

47%

38%

Projected

172%

Exhibit 4. Projected U.S. National Health Expenditures (NHE) by Source, 2013–2023

2013 2018 20230

1000

2000

3000

4000

5000

6000

28% 26%26%

26%25%

24%18%

18%

18%

28%

31%

32%

Federal government

State and local government

Private employers (including "other private revenue")

Households

$2.9 trillion

$4.0 trillion

$5.5 trillion

Note: GDP = gross domestic product.Source: Estimates by Actuarial Research Corporation for The Commonwealth Fund.

NHE in $ billions

% GDP: 17.9% 18.7% 20.5%

Exhibit 5. High Performance Health System Criteria for Developing Options to Stabilize Spending Growth

• Set targets for total spending growth

• Pay for value to accelerate delivery system reform for better outcomes, better care, at lower costs

• Address the systemwide causes of health spending growth―not just federal health costs

• Align incentives for providers and consumers across public and private payers

• Protect access and enhance equity, but also engage and inform consumers

• Invest in information systems to guide action

Exhibit 6. Synergistic Strategy: Potential Cumulative Savings Compared with Current Baseline Projection, 2013–2023

Total NHEFederal

government

State and local

governmentPrivate

employers Households

2013–2018 –$686 –$345 –$84 –$66 –$192

2013–2023 –$2,004 –$1,036 –$242 –$189 –$537

Net impact in $ billions*

Note: NHE = national health expenditures.* Net effect does NOT include potential impact of spending target policy.Source: Estimates by Actuarial Research Corporation for The Commonwealth Fund. Current baseline projection assumes that the cuts to Medicare physician fees under the sustainable growth rate (SGR) formula are repealed and basic physician fees are instead increased by 1% in 2013 and held constant from 2014 through 2023.

Exhibit 7. Synergistic Strategy: Cumulative Savings, 2013–2023

Payment reforms to accelerate delivery system innovation ($1,333 billion)

• Pay for value: replace the SGR with provider payment incentives to improve care

• Strengthen patient-centered primary care and support care teams

• Bundle hospital payments to focus on total cost and outcomes

• Align payment incentives across public and private payers

Policies to expand and encourage high-value choices ($189 billion)

• Offer new Medicare Essential plan with integrated benefits through Medicare, offering positive incentives for use of high-value care and care systems

• Provide positive incentives to seek care from patient-centered medical homes, care teams, and accountable care networks (Medicare, Medicaid, private plans)

• Enhance clinical information to inform choice

Systemwide actions to improve how health care markets function ($481 billion)

• Simplify and unify administrative policies and procedures

• Reform malpractice policy and link to payment*

• Target total public and private payment (combined) to grow at rate no greater than GDP per capita**

Notes: SGR = sustainable growth rate formula; GDP = gross domestic product.* Malpractice policy savings included with provider payment policies.** Target policy was not scored.

Exhibit 8. Projected National Health Expenditures (NHE), 2013–2023: Potential Impact of Synergistic Strategy

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$2.9

$5.5Current baseline NHE projection

Projected NHE net of policy impacts

NHE as percentage of GDP— Current projection: 18% in 2013→21% in 2023 Under unified strategy: 18% in 2013→19% in 2023 Cumulative NHE savings under synergistic strategy: $2.0 trillion

$5.1

Note: GDP = gross domestic product.Source: Estimates by Actuarial Research Corporation for The Commonwealth Fund. Current baseline projection assumes that the cuts to Medicare physician fees under the sustainable growth rate (SGR) formula are repealed and basic physician fees are instead increased by 1% in 2013 and held constant from 2014 through 2023.

NHE in $ trillions

Exhibit 9. Impact of Synergistic Strategy on Projected Annual Hospital and Physician Spending, 2013–2023

Source: Estimates by Actuarial Research Corporation for The Commonwealth Fund. Current baseline projection assumes that the cuts to Medicare physician fees under the sustainable growth rate (SGR) formula are repealed and basic physician fees are instead increased by 1% in 2013 and held constant from 2014 through 2023.

Spending in $ billions

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023$0

$250

$500

$750

$1,000

$1,250

$1,500

$1,750

$2,000

$902

$1,646

$1,509

$597

$1,122

$1,055

Hospital (baseline)

Hospital (net of policy impacts)

Physician (baseline)

Physician (net of policy impacts)

Projected growth of hospital spending, 2013–2023:• Baseline projection: 82% (6.2% annual)• Net of policy impact: 67% (5.3% annual)Projected growth of physician spending, 2013–2023:• Baseline projection: 88% (6.5% annual)• Net of policy impact: 77% (5.9% annual)