1.1: Health
The Health Needs of an Aging and Diverse Population Other Information:
Total health care spending in the United States from all sources—public and private—continues to increase at a breathtaking
pace. From 1990 through 2000, spending nearly doubled to over $1.3 trillion and by 2010 is estimated to more than double again
to almost $2.9 trillion. This unrelenting growth is producing a health care sector that continues to claim an increasing share
of the nation’s gross domestic product (GDP)—about 12 percent in 1990 versus an estimated 18 percent in 2010 and 20 percent
by 2015. Total health care spending in the United States from all sources—public and private—continues to increase at a breathtaking
pace. From 1990 through 2000, spending nearly doubled to over $1.3 trillion and by 2010 is estimated to more than double again
to almost $2.9 trillion. This unrelenting growth is producing a health care sector that continues to claim an increasing share
of the nation’s gross domestic product (GDP)—about 12 percent in 1990 versus an estimated 18 percent in 2010 and 20 percent
by 2015. Of particular concern is the growth in Medicare expenditures, which totaled over $336 billion in 2005. Even without
considering the financial effects of its new prescription drug benefit, Medicare is expected to more than double its share
of the economy by 2030, competing with other spending and economic activity of value. Indeed, expenditures for hospital insurance,
one component of Medicare, exceeded hospital insurance income (exclusive of interest income) in 2004. This fiscal imbalance
is projected to continue. Consequently, the Hospital Insurance Trust Fund is projected to be depleted by 2018. Also of concern
are issues of (1) modernizing Medicare’s management structure, payment policies and methodologies, and benefits package and
(2) reducing Medicare’s administrative burden on providers. Moreover, because of its size and complexity, Medicare is inherently
difficult to manage and is a target for fraud, waste, and abuse. Medicare claims administration contracting is undergoing
significant changes. In the next 3 to 5 years, all of the contracts will be recompeted and much of the claims administration
workload will be transferred to about half the number of current contractors—an undertaking on a scale unlike anything Medicare
has experienced before. Consequently, effective oversight is critical to protecting program dollars and promoting efficient
program operations. Although the introduction of competitive principles to health care helped to contain medical care cost
increases for several years, costs continue to rise, as do the number of Americans without health insurance. These cost increases
have important implications for federal health care programs and outlays and for the availability of employer-sponsored health
insurance. Many employers reportedly have been considering or made changes to decrease the generosity of their health insurance
benefits, or have shifted risk to employees in the form of health plans with significantly higher deductibles, sometimes coupled
with health savings accounts. Moreover, the public is concerned about the quality of care, consumer protection mechanisms,
and the availability of information to allow purchasers to make informed insurance choices. The government also must address
pressing issues in its own health care delivery systems. The Department of Veterans Affairs (VA)—one of the nation’s largest
health care delivery systems—spends about $30 billion a year to provide health care to approximately 4.9 million of the almost
7.7 million veterans enrolled for VA care. VA provides this care using a physical infrastructure that is, in many instances,
obsolete and burdened with excess capacity for inpatient care. The Department of Defense’s (DOD) health care system will spend
about $38 billion in fiscal year 2006 to provide health care to over 9 million eligible beneficiaries who receive health care
provided directly by DOD or through DOD purchase of health care from civilian providers. Because of potential complementary
aspects of the DOD and VA health care delivery systems, pressure is mounting to integrate aspects of the two systems to increase
the efficiency and effectiveness of federal health care delivery, including improvement in the process for veterans returning
from Iraq and Afghanistan who transition from DOD to VA health care. Other areas of concern are the efficiency and effectiveness
of the government’s public health programs, including those administered by the National Institutes of Health, Food and Drug
Administration, Centers for Disease Control and Prevention, Health Resources and Services Administration, Substance Abuse
and Mental Health Services Administration, and Indian Health Service. These programs include those that support and conduct
research on infectious and chronic diseases and disabilities or provide grants to states and nonprofit organizations for conducting
public health activities, such as mental health and substance abuse prevention and treatment services; for reducing risk factors
for potentially disabling conditions such as heart disease, stroke, and diabetes; and for operating health care safety net
facilities. The Food and Drug Administration also conducts regulatory oversight of the United States’ drug and medical device
industries. In recent years, threats to the public health, such as Hurricane Katrina, severe acute respiratory syndrome, and
the potential for pandemic influenza, have posed significant challenges for the government. The threat of terrorists using
biological weapons of mass destruction, such as anthrax and smallpox, has raised similar concerns about the nation’s ability
to adequately respond to bioterrorist attacks. Awareness of these public health threats has heightened concern about disease
surveillance systems (both domestic and international); the surge capacity of the health care system (including hospital beds
and equipment, trained personnel, and laboratories); and coordinated communication systems among federal, state, and local
emergency responders. Greater attention has been given to federal, state, and local efforts to develop coordinated plans for
dealing with public health emergencies and to develop emergency response systems linking hospitals, emergency rooms, health
personnel, and fire and police efforts to respond to any public health threat. Finally, the baby boom generation will undoubtedly
place increasing pressure on the Medicaid program for which joint federal/state expenditures are estimated to be $326 billion
for fiscal year 2005. Medicaid helps to pay for nursing home and other community-based forms of long-term care services. Yet
meeting an increasing demand for such services at a time when many states are recovering from financial difficulty and the
federal government is once again operating at a deficit will pose significant challenges for federal and state decision makers,
with important implications for the services offered by each state. At the other end of the population spectrum are millions
of uninsured children whose families have no health insurance. Medicaid and the State Children’s Health Insurance Program
(SCHIP) help cover the health insurance costs of these low-income Americans. However, as state revenues continue to recover
from the most recent economic downturn, Medicaid costs continue to rise, thus prompting states to find new ways to contain
program spending. In considering reauthorization of SCHIP in 2007, it will be important to examine state experiences implementing
SCHIP and whether the program has met the legislation’s original goal to reduce the number of uninsured children. Accounting
for and overseeing these two programs represents a formidable challenge for the federal government because of the variation
in state policies, procedures, and delivery systems. In particular, Medicaid’s size and complexity make it vulnerable to fraud,
waste, and abuse, making effective federal oversight critical.
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