1 Building the Foundation: Health Care Costs Presentation to the Citizens Health Care Working Group May 13, 2005 Richard S. Foster and Stephen Heffler Office of the Actuary, CMS

2 National Health Expenditure Accounts National Health Expenditure Accounts Health Spending by Age State Health Accounts-- Provider and Residence Projections Businesses, Households & Governments

3 What Are National Health Expenditure Accounts? Funding sources National Health Expenditures PrivatePublic Health Services and Supplies Personal Health Care Two dimensional matrix of expenditures Services/products

4 National Health Expenditures (NHE) as a Share of GDP, % Sources: Centers for Medicare & Medicaid Services, Office of the Actuary: Data from the National Health Statistics Group Total NHE Private Funding Public Funding 7.0%

5 Growth in NHE, Sources: Centers for Medicare & Medicaid Services, Office of the Actuary: Data from the National Health Statistics Group

6 Factors Accounting for Growth in Personal Health Care Expenditures Per Capita Selected Calendar Year Periods Average Annual Percent Change 1 1 Utilization includes quality and mix of services. As a residual, this factor also includes any errors in measuring prices or total spending. 2 Excess medical prices are calculated using the personal health care chain-type index constructed from the producer price index for hospital care, nursing home input price index for nursing home care, and consumer price indexes specific to each of the remaining personal health care components. SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group

7 The Nations Health Dollar: Where It Came From 1 Other Public includes programs such as workers compensation, public health activity, Department of Defense, Department of Veterans Affairs, Indian Health Service, and state and local hospital and school health. 2 Other Private includes industrial in-plant, privately funded construction, and non-patient revenues, including philanthropy. NOTE: Numbers shown may not add to because of rounding. SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group. Medicaid 10% Other Public 1 17% Medicare 15% Out-of-pocket 24% Private Insurance 28% Other Private 2 6%

8 Medicare and Medicaid Spending Trends, Medicare Medicaid SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

9 Per enrollee Private Health Insurance (PHI) Premium and Benefit Trends, PHI Premiums PHI Benefits SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

10 The Nations Health Dollar: Where It Went NOTE: Other Spending includes dental services, other professional services, home health, durable medical products, over-the-counter medicines and sundries, public health, research and construction. SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group. Hospital Care 41% Physician and Clinical Services 20% Nursing Home Care 7% Prescription Drugs 5% Program Administration and Net Cost 5% Other Spending 22%

11 Hospital and Prescription Drug Spending Trends, Hospital Prescription Drugs SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

12 Households $513 Billion Governments $622 Billion Businesses $423 Billion Sponsors of Health Care, 2003 Private Health Insurance $601 Billion Other Private $57 Billion Out-of-pocket $230 Billion Other Private $61 Billion Medicare $283 Billion Medicaid $267 Billion Other Federal $67 Billion Other State and Local $105 Billion Health Services and Supplies $1,614 Billion

13 Health Spending as a Percent of Revenue or Income Sources: Centers for Medicare & Medicaid Services, Office of the Actuary: Data from the National Health Statistics Group

14 National Health Expenditure Accounts National Health Expenditure Accounts Health Spending by Age State Health Accounts-- Provider and Residence Projections Businesses, Households & Governments

15 Personal Health Care Spending and Population by Age, 1999 PopulationPersonal Health Care Children 29% Working-age Adults 59% Elderly 12% Children 12% Working-age Adults 52% Elderly 36% Source: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

16 Where It Came From, 1999 Children (Ages 18 and under) Other Pub 8% Medicaid 27% OOP 15% Other Priv 8% PHI 42% Other Pub 10% Medicaid 15% OOP 18% Medicare 5% Other Priv 6% PHI 46% OOP 18% PHI 14% Other Priv 3% Medicaid 15% Medicare 46% Other Pub 4% Working-age Adults (Ages 19 to 64) Elderly (Ages 65 and over) Average per capita PHC spending: $1,649 Average per capita PHC spending: $3,352 Average per capita PHC spending: $11,089 Children, Working-age Adults, and Elderly Source: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

17 Where It Went, 1999 Children, Working-age Adults, and Elderly All Other 5% Other Pers 5% Other Prof 5% Drugs 7% Dental 8% Physician 33% Hospital 37% All Other 9% Other Prof 4% Dental 7% Drugs 12% Physician 28% Hospital 37% Nursing Home 3% Home Health 5% Hospital 37% Physician 19% Drugs 8% Nondurables 3% Nursing Home 19% All Other 9% All Other --- Nondurables: 2% Home Health: 1% Durables: 1% Nursing Home: 1% All Other --- Nondurables: 3% Other Personal: 3% Home Health: 2% Durables: 1% All Other --- Other Personal: 3% Dental: 2% Other Professional: 2% Durables: 2% Children (Ages 18 and under) Working-age Adults (Ages 19 to 64) Elderly (Ages 65 and over) Source: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

18 Per Capita Health Care Expenditures, by State: CY 1998 Location-of-Provider (before border-crossing adjustment) SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group. NOTE: Personal Health Care spending shown in this chart represents 88% of National Health Expenditures. High (above $4,117) Low (below $3,425) Medium ($3,425-$4,117) U.S. Per Capita: $3,759 MN: $4,230 ND: $4,182 NJ: $4,038

19 Per Capita Health Care Expenditures, by State: CY 1998 Location-of-Residence (after border-crossing adjustment) SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group. NOTE: Personal Health Care spending shown in this chart represents 88% of National Health Expenditures. High (above $4,117) Low (below $3,425) Medium ($3,425-$4,117) U.S. Per Capita: $3,759 NJ: $4,197 ND: $3,881 MN: $3,986

20 National Health Expenditures (NHE) as a Share of GDP, % Sources: Centers for Medicare & Medicaid Services, Office of the Actuary: Data from the National Health Statistics Group Total NHE Private Funding Public Funding 9.2%

21 Growth in NHE slows from peak, but remains above lows of the past decade Sources: Centers for Medicare & Medicaid Services, Office of the Actuary: Data from the National Health Statistics Group

22 Public vs. Private Sector Spending Trends, Public spending Private spending Sources: Centers for Medicare & Medicaid Services, Office of the Actuary: Data from the National Health Statistics Group

23 Projected Prescription Drug Spending by Payer, 2005 and 2006 Medicaid 18% Medicare 2% Out-of-pocket 29% Private Insurance 47% Other Public 4% 2006 ($249.3B) 2005 ($223.5B) Sources: Centers for Medicare & Medicaid Services, Office of the Actuary: Data from the National Health Statistics Group Private Insurance 39% Out-of-pocket 20% Medicaid 9% Medicare 28% Other Public 4%

24 National Health Expenditure Accounts Website statistics/nhe/