Objectives
Health Care Expenditures
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1.Understand the definition and purpose of the gross national
product (GNP), gross domestic product (GDP), consumer price
index (CPI), and producer price index (PPI).
2.Recognize both the magnitude of and trends in annual national
health care expenditures, per capita health care spending, and
percentage of GDP spent on health care.
3.Cite and explain the four major factors responsible for rises in
health care expenditures.
4.Compare price indexes (including relative changes over time)
for selected health care goods and services.
5.Explain the concept of health care spending "burden" and
describe how this "burden" changed between 1965 and 1991 for
business, households, and government.
6.Recall the percentage of national health care expenditures
accounted for by primary sources of payment.
7.Recall the percentage of national personal health care
expenditures accounted for by selected types of goods/services.
8.Compare the United States with other developed nations in
terms of health care spending and health status.
What’s the difference:
GDP vs. GNP???
Definitions: GNP vs. GDP
Ê Gross National Product (GNP):
z
the market value of goods and
services produced by labor and
property supplied by legal residents of
the economy over a given year
Ê Gross Domestic Product (GDP):
z
Current market value of goods and
services produced by labor and
property located in the economy over
a given year
Barron JM, Lynch GJ, Blanchard KH. Economics: A Survey. 8th Edition. 2006
What’s the difference:
GDP vs. GNP???
Ê GNP = everything the U.S. produces
in the world
Ê GDP = everything produced inside
the U.S.
z
z
Better for showing short-term trends
in the economy
Most often used to compare U.S. to
other countries
Barron JM, Lynch GJ, Blanchard KH. Economics: A Survey. 8th Edition. 2006
Ê A lot of people will use these terms
interchangeably!!!
Ê GNP = GDP + U.S. labor or capital
located outside the states – foreignowned labor or capital located in the
states
Barron JM, Lynch GJ, Blanchard KH. Economics: A Survey. 8th Edition. 2006
More terms: CPI, PPI, MPI
Ê Consumer Price Index (CPI):
z
Measures changes in the prices of
goods purchased by the typical urban
family of 4
Ê Medical Price Index (MPI):
z
Sub-index of CPI, looking at the
medical field
Ê Producer Price Index (PPI):
z
Measures changes in the prices for a
manufacturer
Barron JM, Lynch GJ, Blanchard KH. Economics: A Survey. 8th Edition. 2006
1
More about CPI…
More about CPI…
Ê Government surveys households to
determine what is purchased during a
given “base period”
Ê In the future, the price to purchase
the same “basket of goods” is
computed
Ê Records purchases and their prices
Ê For the base period, these purchases
are called a “basket of goods”
Ê CPI is the ratio of new price to the
original price x 100
Barron JM, Lynch GJ, Blanchard KH. Economics: A Survey. 8th Edition. 2006
z
Health Care Expenditures - U.S.
7000
Total Expenditures
Per Capita
6000
5000
Doubled from 1985-1995
$ (Billions)
Ê “Basket of goods” = Pizza and Tums
Ê In 2005: bought 8 pizzas at $10 each
and 10 bottles of Tums at $7 each
Ê In 2006: bought 8 pizzas at $12 each
and 10 bottles of Tums at $6 each
Ê CPI = ($12 x 8) + ($6 x 10) x 100 =104.0
($10 x 8) + ($7 x 10)
4000
3000
2000
1000
0
19
20
19
62
19
65
19
68
19
71
19
74
19
77
19
80
19
83
19
86
19
89
19
92
19
95
19
98
20
01
20
04
Example of computing CPI
Prices have increased about 4% in the last
year
Ê People live longer today – better
health, but longer care!
Barron JM, Lynch GJ, Blanchard KH. Economics: A Survey. 8th Edition. 2006
Centers for Medicaid and Medicare Services: http://www.cms.hhs.gov/NationalHealthExpendData/
Health Care Expenditures - U.S.
Health Care Expenditures
U.S. population
Gross Domestic Product
NHE % GDP Change
18
Per Capita Spending
16
Health Care Inflation > Economy Inflation
Ê 1929: $29 billion
Ê 2000: $6,280 billion
Centers for Medicaid and Medicare Services: http://www.cms.hhs.gov/NationalHealthExpendData/
10
8
6
% Change
14
12
4
2
20
00
20
04
19
96
19
88
19
92
19
84
19
80
19
76
19
72
19
68
19
60
0
19
64
19
20
19
62
19
65
19
68
19
71
19
74
19
77
19
80
19
83
19
86
19
89
19
92
19
95
19
98
20
01
20
04
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
Ê 1929: 3.5% change in NHE GDP
Ê 2000: 16% change in NHE GDP
Centers for Medicaid and Medicare Services: http://www.cms.hhs.gov/NationalHealthExpendData/
2
Health Care Expenditures
Ê 1960s: government becomes a
payor
z
z
Medicare and Medicaid begins!
Major jumps in % GDP
Ê Health Care Inflation
z
z
z
Occurs at higher rate than overall
economy
Disproportionate
Also growing at a faster rate
Heffler, et al. Trends: Health Spending Projections Through 2013: growth is projected to slow in 2003 after six consecutive years of acceleration. Health Affairs
[serial online]. 11 Feb 2004: 79-93
Health Care Inflation
Health Care Expenditures
Ê Most recent data: 2008->
z
z
z
2320 Billion total HCE
$7538 per capita
16% GDP
Ê Projections:
z
z
z
Perhaps slowing slightly
Still will be disproportionate
Estimated to increase to 18.4% of GDP
in 2013
Heffler, et al. Trends: Health Spending Projections Through 2013: growth is projected to slow in 2003 after six consecutive years of acceleration. Health Affairs
[serial online]. 11 Feb 2004: 79-93
Health Care Inflation
Ê A study in the late 90’s broke down HC
inflation by what were the sources of
increases
Ê Found four major factors
Heffler, et al. Trends: Health Spending Projections Through 2013: growth is projected to slow in 2003 after six consecutive years of acceleration. Health Affairs
[serial online]. 11 Feb 2004: 79-93
The 4 Major Factors
From 1993 – 1995:
Ê Health Care Expenditures up by 6.8%
Ê Population up by 13%
Ê Inflation (in general) up by 36%
Ê Excess health care inflation up by
21%
Ê Increased utilization/intensity of
services up by 30%
These 4 factors are consistent!
19731983
Health Care
Expenditures
Inflation
19831993
19931995
13.4% 9.4% 6.8%
57%
38%
36%
Population Increases
6%
10%
13%
Health Care Inflation
30%
22%
21%
Utilization
27%
30%
30%
3
4 Factors
Ê Things we can’t do much about:
Population Increases
General Inflation
Ê However, we can do something
about:
CPI Breakdown of Medical Items
2003
1998
1993
1988
1983
1978
1973
1968
1963
1958
1953
1948
1943
1938
1933
1928
1923
1918
1913
Ê Medical care has increased at a greater
rate than other items (and CPI!)
Bureau of Labor Statistics, 1913-2006
Understand and be
able to explain:
Ê the concept of health care spending
“burden”
Ê how health care spending changed
between 1965 and 1981 for businesses,
households, and gov’t
2003
1998
1993
1988
1983
0
1978
1913
50
1973
100
Rx Drugs: Large
Jump in 1980s
1968
150
Rx Drugs
Hospital Services
1963
200
1958
250
1953
300
Physicians
Hospital Services
1948
350
Average CPI
OTC Drugs
500
450
400
350
300
250
200
150
100
50
0
Food and Beverage
Medical Care
1943
Average CPI
Transportation
Personal Care
1938
CPI of Various Items
1933
z
Health care inflation (ours is much
higher than other countries)
Health care utilization (who’s paying
for all that use?)
1928
z
1923
z
1918
z
Compare and contrast price
indexes (including changes
over time) for selected health
care goods and services
Ê Hospital services are a major
contributor to high costs
Ê Rx drugs are a close second now!
Bureau of Labor Statistics, 1913-2006
The Burden
Ê Has income or revenue kept in pace
with health care expenditures?
Ê If so, not a big issue
Ê If not, this the “burden” of HC costs
to increaseÊ May force a choice between meeting
other needs and getting the health
care needed/ desired
4
Burden on Payors: Health Care Spending
as a % of…
1965
1975
1985
1991 95
00
Business salaries/wages
2.0
4.4
7.0
9.1
9
8
Business after-tax profits
12.4
31.1
88.3
97.5
5.3
5.2
Household income
4.2
4.3
4.8
5.1
Federal gov’t revenues
3.5
11.0
14.4
20.5
State and local gov’t revenues
8.0
11.1
15.4
21.4
Recall the % of national
health care expenditures
accounted for by the
primary sources of payment
Ê Household income: burden not changed
much at all
Ê Increased A LOT for businesses and gov’t
z
AND, both of these want reforms! Spending a lot
of money
Private Health Insurance
Private Health Insurance
Ê Growth in employer-sponsored health
insurance premiums increased 12% in 2004
Ê Health spending per privately insured
American increased 7.4% in 2003
z
Health insurance is increasingly difficult to
afford
Ê Increased patient cost sharing
Ê Premiums per enrollee increased 10.4%
in 2003
Ê 3rd consecutive year of double-digit
growth
Ê Some suggestion premiums are
increasing at a greater rate than costs
z
z
Employers shifting costs to employees
Premiums also growing at a higher rate
Ê Benefit structures may change to encourage
patients to use efficient providers or choose
more effective therapies
Heffler, et al. Trends: Health Spending Projections Through 2013: growth is projected to slow in 2003 after six consecutive years of acceleration. Health Affairs
[serial online]. 11 Feb 2004: 79-93
Strunk, Ginsburg. Tracking Health Care Costs: Trends Turn Downward in 2003. Center for Studying Health Change. 2004 June: 1-3.
% change from previous year
in NHE by payor
PERCENTAGE OF PERSONAL HEALTH CARE PAYMENTS
2007
Direct/out-of-pocket payments
55.9
39.1
27.8
22.6
21.0
18.9
14.3
12
Third-party payments, total
44.1
60.9
72.2
77.4
79.0
81.1
85.7
10
8
Private insurance
21.0
23.6
29.1
33.8
32.1
32.2
42.3
6
Government
21.4
34.7
39.5
39.8
43.5
45.5
52.8
4
Other
1.8
2.5
3.5
3.9
3.4
3.5
4.9
%
1960 1970 1980 1990 1994 1996
18
16
NHE
Private
Public
14
2
0
1970 1980 1990 1993 1997 1998 1999 2000 2001 2002 2003 2004
Ê Direct out of pocket has steadily dropped
Ê Government biggest payor by far
Centers for Medicaid and Medicare Services: http://www.cms.hhs.gov/NationalHealthExpendData/
5
A word about Medicare…
Ê Medicare Part D
z
z
Will see increased government
spending over previous years
Perhaps similar to what happened in
the 60’s when Medicare and Medicaid
began
Heffler, et al. Trends: Health Spending Projections Through 2013: growth is projected to slow in 2003 after six consecutive years of acceleration. Health
Affairs [serial online]. 11 Feb 2004: 79-93
6