1.1: Health Needs

Financing and Programs to Serve the Health Needs of an Aging and Diverse Population

Other Information:

By 2018, total health care spending in the United States is expected to reach almost $4.4 trillion, almost six times what it was in 1990. As a result, the health care sector will continue to claim an increasing share of the national income—from about 12 percent of GDP in 1990 to an estimated 20 percent in 2018. Not surprisingly, health care comprised 25 percent of all federal spending in 2008, has grown three times faster than the rest of the federal budget over the last quarter century, and is estimated to continue to grow at a rapid pace. (See fig. 21.) This spending growth creates tremendous challenges as the federal government grapples with efforts to institute health care reform and enable access to care for an aging and diverse population, while ensuring care quality and constraining costs. A weak economy and increased unemployment have created further pressure as the number of people who are uninsured or depending on government-sponsored health care coverage has risen. New federal efforts: The federal role in health care is becoming ever more critical. In the coming years, the federal government will likely take actions that have the potential to significantly improve the nation’s health through new efforts to regulate or reform the provision of health insurance, reform payments to health care providers, safeguard public health, and ensure and oversee the quality of care. Federal programs such as Medicare and Medicaid finance health care for some of the nation’s most vulnerable populations— low-income children, people with disabilities, and older adults—and some of these populations are growing. DOD provides health care to servicemembers and their families, and VA provides care to the veterans; the two agencies are jointly responsible for the transition of care for wounded veterans from DOD to VA. Other federal programs that protect and promote the public’s health, such as preparing for and responding to public health emergencies, have to respond to emerging issues and new demands. Access to health care: The continuing decline of private health insurance coverage has been coupled with a rise in the number of people who rely on government health insurance programs or who are uninsured. From 2000 to 2008, private coverage declined from 203 million to 201 million, while people who report receiving public coverage rose from 69 million to 87 million. Individuals can be covered by more than one public program, such as receiving coverage from both Medicare and Medicaid. With the growth in the uninsured from 38 million in 2000 to 46 million in 2008, the Congress passed the Patient Protection and Affordable Health Care Act (Pub. L. No. 111-148) in 2010. This health care reform has provisions affecting private and public coverage—notably, those involving standards for private health insurance, entities to provide or help consumers access coverage, tax incentives, and enhancements to public programs. Such reforms may increase access to health insurance for some individuals but will need to be carefully monitored for their cost implications, effects on those already covered, and the need for effective regulatory oversight. Further, rising health care spending could lead the federal government to consider other changes in the coming years that could affect access. For example, the federal government is currently estimated to forgo over $1.4 trillion in tax revenue from 2010 through 2014 as a result of the tax incentives given to employers that contribute to their employees’ medical care and medical insurance, but changing these incentives could discourage employers from providing these benefits. Medicare: Medicare’s projected growth in spending will continue pressures to improve its financing and management. Medicare now finances health care for an estimated 45 million Americans who are age 65 or older or with disabilities, at a cost estimated to be $458 billion in 2010. Medicare spending is expected to rise to $878 billion by 2019. As our population ages and medical costs escalate, Medicare is expected to more than double its share of the economy by 2035, crowding out other government spending and economic activity. Fundamental, structural changes are necessary to stem this rapid growth and ensure the program’s long-term sustainability. Medicare’s payment methods must be designed to improve care quality and efficiency while preserving equitable access to care. GAO has designated Medicare as a high-risk program, vulnerable to waste, fraud, abuse, and mismanagement. This makes improvements in management of the program, including preventing improper payments, a priority. Medicaid: Like Medicare, Medicaid’s growth in costs also calls for increased federal oversight to ensure its financial and operational integrity. The aging of the population and the national economic downturn have increased pressure on the program, for which federal expenditures are projected to rise from $290 billion in 2010 to $471 billion in 2019. GAO recently redesignated Medicaid as high risk, in part because its decentralized stateadministered structure makes federal oversight extremely challenging. This federal-state program covers acute health care and long-term-care services for an estimated 50 million people per month— including about 8 million who also receive Medicare—through more than 50 distinct state-based programs. The Centers for Medicare & Medicaid Services (CMS) provides oversight at the federal level, but the states administer their respective programs’ day-to-day operations. Although CMS has taken steps to improve the fiscal and management oversight of Medicaid, CMS’s actions remain insufficient given the program’s size, growth, and diversity. Oversight: Federal oversight is needed to ensure that recipients of Medicaid and other programs providing coverage or care to vulnerable populations have access to quality long-term and acute-care services. As of 2007, Medicaid, Medicare, and other public programs contributed about three quarters of the over $200 billion spent in 2007 on nursing home, home health, and other long-term care. The aging of the baby boomers and longer life expectancies because of medical advances will increase the elderly population over the next three decades, particularly those 85 and older— and will increase the demands for long-term care. The vulnerability of the population needing long-term care underscores the need for oversight to ensure that providers of institutional or communitybased services comply with all federal and state requirements. Medicaid along with the states’ Children’s Health Insurance Program (CHIP) and other programs are particularly important for responding to the acute health care needs of millions of vulnerable, low-income Americans. However, enrollment has not guaranteed eligible individuals’ access to needed medical and dental services. Strengthened federal oversight is essential to ensure that these programs effectively and efficiently provide access to quality care. VA and DOD: VA and DOD face challenges to improve two of the largest health care systems in the world to better meet the needs of veterans, servicemembers, and their families. VA is expected to spend about $48 billion in fiscal year 2010 to provide health care to about 6 million patients—about 5.4 million of whom are veterans—while DOD’s health care system is expected to spend over $50 billion in fiscal year 2010 to provide health care to over 9 million eligible beneficiaries, including active duty personnel, retirees, and their dependents. Both systems face challenges to improve and adapt infrastructure and services in an era of growing demand for health care and increasing fiscal pressures. In addition, these departments must meet the needs of servicemembers returning from Iraq and Afghanistan who transition from DOD’s to VA’s health care systems. VA’s infrastructure is not effectively aligned with its new health care delivery model, which emphasizes outpatient care delivered closer to where veterans live. As a result of the influx of new veteran enrollees due to relaxed eligibility standards and the return of veterans from combat, VA faces difficult decisions about how best to allocate its resources. DOD faces pressures to adapt its health care structure because of expanded benefits and an evolving marketplace, characterized by rising costs and beneficiaries’ concerns about access. Because aspects of VA’s and DOD’s health care delivery systems are potentially complementary, integrating aspects of their operations could increase their overall efficiency and effectiveness. Quality of health care: The federal government plays a critical and growing role in promoting, protecting, and ensuring the quality of health care—from patient safety to encouraging the implementation of quality measures—but the effectiveness of the government’s efforts remains a concern. For example, such concern has led to the increasing public and congressional scrutiny of the Food and Drug Administration (FDA), which is currently under pressure to better oversee the drug and medical device industries and now must regulate tobacco products. FDA faces the challenge of increasing inspections of medical products manufactured abroad and conducting more intense review of products already on the market. Federal agencies are also involved in new efforts to improve health care quality, such as by facilitating voluntary reporting on patient safety issues, developing and applying quality measures and payment methods based on them, and expanding health information technology use. However, these can raise new issues, such as maintaining medical information privacy, as the use of health IT expands. Response to health threats: Recent public health threats—whether natural or manmade—have heightened concern about federal efforts to respond quickly and effectively. Emerging infectious diseases, like the influenza pandemic caused by the 2009 H1N1 virus, require timely and effective surveillance and prompt action by the CDC and effective coordination with other public health agencies at international, federal, state, and local levels. The use of anthrax as a weapon in 2001 raised concerns about the nation’s preparedness for biological terrorism attacks, while disasters such as Hurricane Katrina highlighted the need to effectively plan for catastrophic events that can disable a regional health care system or exacerbate widespread acute or chronic physical and mental health problems. Although the federal government has taken a number of actions to improve preparedness, such as devising a national strategy and implementation plan to deal with influenza pandemics, and the Congress has appropriated funds to help states and localities improve preparedness, many issues still need to be addressed—such as agency roles in leading the response; the adequacy of surveillance; and gaps in health care capacity, guidance, and planning. The demands on the federal government to meet Americans’ health care needs are growing in volume and complexity, as federal challenges to oversee health programs escalate. GAO’s forthcoming work on health coverage options, federal health programs’ financing and management, and steps to ensure care access and quality and protect public health can help federal leaders make more informed and strategic decisions in reconciling these competing demands. To support efforts by the Congress and the federal government to address the nation’s health care needs in the 21st century, GAO has established the following performance goals and key efforts:

Stakeholder(s):

• Aging Population


• Diverse Population

Indicator(s):

Indicator:1

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