Overview of USA Inc.’s Key Financial Challenges

Overview of USA Inc.’s Key Financial Challenges & Potential and/or Solutions Financial Net Present Cost! Mathematical Illustrations Rank Challenge ($T / % of 2010 GDP) and/or Potential Policy Solutions? * Isolate and address the drivers of medical cost inflation 1 Medicaid $35 Trillion? / 239% — * Improve efficiency / productivity of healthcare system ¢ Reduce coverage for optional benefits & optional enrollees « Reduce benefits ¢ Increase Medicare tax rate : Metis ce en eee Isolate and address the drivers of medical cost inflation ¢ Improve efficiency / productivity of healthcare system * Raise retirement age * Reduce benefits Social 5 * Increase Social Security tax rate : Security oS MIN Snes ¢ Reduce future initial benefits by indexing to cost of living growth rather than wage growth * Subject benefits to means test to determine eligibility vn GDP / * Invest in technology / infrastructure / education 4 -- * Remove tax & regulatory uncertainties to stimulate employment growth Revenue * Reduce subsidies and tax expenditures & broaden tax base Growth Govemment ¢ Resume the 20-year trend line for lower Federal civilian employment 5 oe oe * Implement more flexible compensation systems Inefficiencies ‘ : : . * Consolidate / selectively local outsource certain functions Note: 1) Net Present Cost is calculated as the present value of expected future net liabilities (expected revenue minus expected costs) for each program / issue over the next 75 years, Medicare estimate per Dept. of Treasury, “2010 Financial Report of the U.S. Government,” Social Security estimate per Social Security Trustees’ Report 4 Pe 2) For more details on potential solutions, see slides 252-410 or full USA Inc. presentation. 3) Medicaid does not have dedicated revenue source and its $35T net present cost excludes funding from general tax revenue, NPV analysis based on 3% discount rate applied to CBO’s projection for annual inflation-adjusted expenses. www.kpcb.com USA Inc.| Summary 445 The Essence of America’s Financial Conundrum & Math Problem? While a hefty 80% of Americans indicate balancing the budget should be one of the country’s top priorities, per a Peter G. Peterson Foundation survey in 11/09... ...only 12% of Americans support cutting spending on Medicare or Social Security, per a Pew Research Center survey, 2/11. Some might call this ‘having your cake and eating it too...’ P a USA Inc. | Summary 446 HOUSE_OVERSIGHT_021064