0 , ' 0 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 ; ae ¢ Increase Medicare tax rate 0, = pecTteret) $23 Trillion / 156% ¢ Isolate and address the drivers of medical cost inflation ¢ Improve efficiency / productivity of healthcare system * Raise retirement age ¢ Reduce benefits Social ar 5 * Increase Social Security tax rate : Security ot MIN ene ¢ Reduce future initial benefits by indexing to cost of living growth rather than wage growth * Subject benefits to means test to determine eligibility Slow GDP / * Invest in technology / infrastructure / education USA ie : 4 -- * Remove tax & regulatory uncertainties to stimulate employment growth Revenue a ; * Reduce subsidies and tax expenditures & broaden tax base Growth ¢ Resume the 20-year trend line for lower Federal civilian employment Government : : 5 neneenc -- ¢ Implement more flexible compensation systems nefficiencies . ; , . * 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 8/10). 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 Ke present cost excludes funding from general tax revenue, NPV analysis based on 3% discount rate applied to CBO’s projection for annual inflation-adju