Differences by Age Groups in Health Care Spending

by Charles R Fisher

This paper presents differences by age in health care spending by type of expenditure and by source of funds through 1978

Use of health care services generally increases with age The average health bill reached $2026 for the aged in 1978 $764 for the intermediate age group and $286 for the young Biological demographic and policy factors determine each age groups share of health spending

Public funds financed over three-fifths of the health exshypenses of the aged with Medicare and Medicaid together acshycounting for 58 percent Most of the health expenses of the young age groups were paid by private sources

Expenditures for medical care differ markedly with age The differences apply to the type and amount of medical care required as well as the source of payshyment This article examines these differences for three broad age groupsmdashthe young (under age 19) the intermediate group (ages 19-64) and the aged (65 and older) Data are presented for calendar year 1978 and for several earlier periods Summary highlights reveal that

bull Of the $168 billion total spent for personal health care in 197812 percent was spent for the young 59 percent for persons 19 to 64 and 29 percent for the oldest group For a breakdown of private and public spending by age group and type of exshypenditure see Tables A through D in the Technical Note Appendix C

bull The average medical care bill for the aged reachshyed $2026 per person compared with $764 for the intermediate group and $286 for the young

bull About half of all public spending for personal health care was for the aged

bull Medicare payments covered 44 percent of the pershysonal health care expenses for the aged and Medicaid reimbursed an additional 13 percent

bull Private financing primarily private health inshysurance and direct payments is the major chanshynel of payment for younger age groups providing about 70 percent of their health care costs

This article also examines some of the reasons conshytributing to the diversity in health care spending by different age groups Age-related utilization statistics are shown by type volume and intensity of service These utilization statistics are examined for hospital care physicians services drugs and nursing home care Also considered are demographic changes and variations in health status Policy-relevant variables such as payment source and reimbursement policy are examined to the extent that they affect utilization

Channels of payment for health care mainly private health insurance public financing and direct payments are explored The role of the major public programs primarily Medicare and Medicaid in funshyding health care are described Trends in channels of payment in the hospital sector demonstrate how private and public funding interact Finally the amount and sources of out-of-pocket expenses for health care particularly for the elderly are described

Level of Health Care Spending by Age Group

The level of personal health care spending varies by age group as shown in Table 1 As might be expected aged persons spent a disproportionate share of these dollars Persons aged 65 and over comprise only 11 percent of the population but account for 29 percent of all personal health care expenditures Thirty-one percent of the population are under age 19 but this group accounts for only 12 percent of spending for health care

Persons aged 65 and over spent $2026 per capita for health caremdashseven times the $286 per capita spending for persons under age 19 and two-and-oneshyhalf times the $764 per capita expenditure for persons aged 19 to 64

VARIATIONS IN HEALTH CARE EXPENDITURES BY AGE GROUP

Health care expenditures are the product of three factors volume which is the number of contacts with health care providers intensity which is the number of services provided in an average contact and average price per service Variations in health care spending by age group are due mostly to the first two

HEALTH CARE FINANCING REVIEWSPRING 1980 65

TABLE 1

Distribution of Population and of Personal Health Care Spending by Age Group 1978

Health Care Per Percentage Distribution Age Spending Population Capita Health Care

(billions) (millions) Spending Spending Population

All Ages $1679 2230 $ 753 1000 1000

Under 19 199 695 286 119 312 19-64 987 1292 764 588 579 65 and Over 494 243 2026 294 109

factors as average price per service is assumed not to vary by age For example a flu shot should cost the same for a 19-year old or for an 80-year old pershyson Variations in health care expenditures by age group due to differences in volume and in intensity are examined for hospital care physicians services drugs and nursing home care

Hospital Care

Hospital care expenditures comprised the major health care expense category for all age groups in 1978 Yet the percentage of total health expenditures for hospital care varies significantly by age group Hospital care comprises 36 percent of all expenshyditures for persons under age 19 48 percent for pershysons aged 19 to 64 and 43 percent for persons aged 65 and over

Hospital expenditures per capita increase with age The $869 per capita hospital expenditure of the aged is more than eight times the $102 per capita expenshyditure for the young and more than twice the $370 per capita spent for persons aged 19 to 64

One method of evaluating this variation in hospital expenditures is to examine the volume of services used According to the 1978 Health Interview Survey (HIS) conducted by the National Center for Health Statistics (NCHS) both the percentage of each age-group hospitalized in short-stay hospitals and the number of hospital days used by each group inshycreases with age [NCHS 1978] About five percent of persons under age 17 were hospitalized in 1978 comshypared to over 18 percent of persons aged 65 and over Ten percent of all persons were hospitalized at least once in 1978 (Table B) The annual number of hospital days used ranged from an average of about six days per user for the youngest age group to an average of about 16 days per user for the HIS sample of persons 65 and over Because of limitations in the HIS survey estimates of hospital use by the elderly are significantly understated1

1The Health Interview Survey (HIS) which provided the data for Table 2 continuously samples members of households It is not intended to provide complete inshyformation on the deceased or on the institutionalized population Thus Table 2 tends to underestimate the volume of services used by the aged [See Appendix B for a complete discussion of this issue]

Another method of evaluating the variations by age in hospital expenditures is to examine the intensity of care One measure of the age-relative intensity of hospital care is the variation by age group in charges per day A study byNCHS for the years 1968-1970 (the last years for which such information was collected for the general population) showed that the average charge per day of care for the youngest persons was about the same as that for all hospital users The average charge per day for the middle age group was about six percent more than the overall average and that for the elderly was eight percent less (Hospital Discharge Survey 1974) Thus although the aged use far more hospital days per capita than do younger pershysons the average intensity of care per hospital day is less Given the relatively small variation in the intensishyty of hospital care it should be concluded that volumemdashthe number of hospitalizations per capita and the average length of hospital staymdashis the domshyinant factor in the differences by age in spending for hospital care

Physicians Services

Care by physicians represents a significant proporshytion of the health care dollars for all age groups As a share of total spending for health care physicians care ranks second to hospital care for the younger age groups and third (after hospital and nursing home care) for the aged

The percentage of the population making at least one visit to a physician per year does not vary significantly with age Over 85 percent of the populashytion received physicians services in 1978 (NCHS 1979) However age-related variations both in the number of visits per year and consequently in annual per capita expenditures is observed In 1978 the average number of out-of-hospital visits to physicians by persons under age 17 was 41 compared to an average of 63 visits by persons 65 and over The per capita expenditures for physicians services in 1978 ranged from $ 75 for young persons to $366 for pershysons aged 65 and over

To further evaluate the relationship of age to expenshyditures for physicians services intensity of service has been compared by age group One measure of the relative intensity of physicians services is the average duration of a visit The National Ambulatory Care Survey for 1975 showed that the mean time per visit was greater for older patientsmdash12 minutes for persons under age 16 compared to 15 minutes for all

HEALTH CARE FINANCING REVIEWSPRING 1980 66

TABLE 2

Percent of Persons Hospitalized Days per Patient Physician and Dental Visits per Capita Noninstitutionalized Persons by Age Group 1978

Percent of PersonsHospitalized

Short-Stay Hospital Days per Patient

Physician Visits

per Capita Dental Visits

per Capita

Age Group Total Men Women Total Men Women

All Persons 104 85 122 97 110 88 48 16 Under 17 53 56 50 64 64 65 41 16 17-2425-44

106 113

62 69

148 154

58 73

72 89

52 66

43 47

15 17

45-6465 and Over

121 180

118 192

124 172

123 156

129 172

119 144

53 63

17 12

Source Current Estimates from the Health Interview Survey

other age groups This survey also showed that more older persons tend to have visits in which drugs are prescribed injections given and blood pressure checked The relative number of surgical operations by age group is another measure of the variations in the complexity or intensity of physicians services In 1977 the Hospital Discharge Survey showed that the number of surgical operations in hospitals was greater for older persons There were 41 per 1000 pershysons under age 15 and 166 operations per 1000 pershysons aged 65 and over [NCHS 1979] Thus the intenshysity of a physician visit as well as the number of visits and the per capita expenditure for physician services are greater for older persons

Prescription Drugs and Drug Sundries

Along with short-stay hospital and physician care prescription drug usage varies with age These drug expenditures represent nine percent of personal health care expenditures for the total population They constitute 14 percent of the expenditures for persons under age 19 9 percent for persons 19-64 and seven percent for persons 65 and over In 1978 per capita spending for prescription drugs ranged from $41 for those under age 19 to $133 for the aged Similarly the number of prescriptions per capita and the intensity of a prescription (measured by average price) also inshycreased with age The following table shows spending for drugs by age group It is based on a 1973 NCHS survey adjusted to include institutionalized and deceased persons

TABLE 3 Prescriptions per Capita and Average Price

per Prescription 1973

Age Group Prescriptions Average Price per Capita per Prescription

0-16 32 $33917-24 42 37725-44 56 43345-64 87 50965 and over 144 509

Source (Trapnell 1979)

HEALTH CARE FINANCING REVIEW SPRING 1980

Dental Care

Unlike other categories of care spending for dental care does not increase directly with age The number of dental visits per person by age group remains relatively constant for persons under age 65 and decreases for older persons

According to the Health Interview Survey only 40 percent of the aged population reported visiting a denshytist in 1977 compared to over 60 percent of the other age groups Dental care expenditures accounted for 9 percent of total health care costs for persons aged 19 to 64 but for only three percent of total spending for the aged group However it should be noted that the intensity of dental services measured by the average charge per dental visit is greater for older persons Thus although the aged make fewer dental visits than do others their visits are more costly

Nursing Home Care

Nursing home use is dominated by the aged or near-aged The National Nursing Home Survey (NNHS) shows that persons 65 and over comprised 86 percent of the nursing home population in 1977 Persons in the 55 to 64 age group accounted for an additional eight percent of nursing home residents As expected in 1978 nursing home care was second to hospital care as the most expensive health item for persons aged 65 and over The per capita expenditure was $518mdashone-fourth of the total health care spending for that age group

Causes of Increased Health Care Spending with Age

Except for dental care the number of contacts with health care providers increases with age Much of this increase is due to degeneration associated with aging shown in chronic diseases and physical impairshyment requiring frequent health care services One measure of degeneration is a persons subjective assessment of the degree to which a chronic condishytion is limiting his or her activity

67

The percentage of persons reporting limitation of activity (in the Health Interview Survey for 1974) acshycelerates with age and accelerates faster for men than for women (Figure 1) As people age an increasshying proportion suffers from some chronic condition reshyquiring medical attention

The 14 percent of the population who suffered a chronic condition accounted for 37 percent of all short-stay hospital discharges for 55 percent of all short-stay hospital days and for 28 percent of all out-of-hospital physician visits Chronically impaired pershysons account for an increasing share of hospital discharges as age increases (Figure 2)

For males each percentage point increase in the proportion of an age group suffering a chronic condishytion (Figure 1) is associated with an increase of 45 hospital discharges per 10000 persons For females a percentage point increase in the same proportion is associated with an increase of 38 hospital discharges per 10000 persons In the group aged 65 and over people with chronic conditions account for most of the hospitalization

The acceleration of the incidence of chronic condishytions shown in Figure 2 and of the implied use of health services related to these conditions is understated because two groups who use many health services are excluded institutionalized pershysonsmdashwho are limited in activity by definitionmdashand people who died before the survey

Increasing use of health care services associated with increases in chronic conditions are rooted in age-related degeneration of biological functions Accorshyding to one study each year of life after age 30 is acshycompanied by slightly less than one percent degeneration in a composite of ones functional capacity (Strehler 1977) This steady rate sets the stage for increasing death disease and impairment which are directly associated with health care use rates

TRENDS IN HEALTH CARE SPENDING Demographic Shifts

Personal health care spending for older people is rising as a percentage of the total and that for young people is falling as shown in Table 4

This trend results in part from the decrease in the proportion of the population under age 19mdasha decrease which began around 1965 Thirty-eight percent of the

population was under age 19 in 1965 the percentage dropped to 31 percent by 1978

This aging of the population tends to increase the intensity and therefore the costs of health care As shown previously health care for the young is generally less intense than for older age groups Therefore as the percent of total contacts with health care providers by the young diminishes due to their declining relative and absolute numbers the average intensity of service for the total population increases

Changes in fertility rates have affected hospitalizashytion rates for the child-bearing age group Hospital days of care for deliveries dropped 37 percent beshytween 1967 and 1977 from 410 days per 1000 females aged 15 to 44 in 1967 to 259 days in 1977 Decreasing birth rates also imply fewer physician visits and less prescription drug spending for this group (NCHS 19671977) This has a dual effect on health care use it reduces the number of persons needing health care and the number of women needing obstetrical care

Aging of the Aged

Within the group aged 65 and over the proportion of the very old is increasing Persons aged 85 and over comprised about 59 percent of the total populashytion of the nation in 1965 and 87 percent in 1978mdasha trend which may continue for some years

The impact of this trend on health care costs is significant In 1976 under Medicare persons aged 85 and over used 5484 days of short-stay hospital care per 1000 persons compared to 3684 days for all pershysons 65 and overmdasha 50 percent higher rate (unshypublished HCFA data) The rate for persons under age 65 was 894 days per 1000 persons Further persons aged 85 and above accounted for 35 percent of all nursing home days of care in 1977 [NNHS 1977] while comprising only eight percent of the population aged 65 and over

IMPACT OF PUBLIC POLICY

The implementation of the Medicare and Medicaid programs and the Economic Stabilization Program [ESP] appear to explain changes in health care use and costs by age groups which are not associated with age-related biological factors

TABLE 4

Percentage Distribution of Personal Health Care Expenditures by Age Group Selected Calendar Years 1965-78

Age Group 1965 1970 1976 1977 1978

All Ages 1000 1000 1000 1000 1000

0-18 171 158 126 122 118 19-64 591 580 589 587 588 65 and Over 238 263 285 290 294

HEALTH CARE FINANCING REVIEW SPRING 1980 68

FIGURE 1 Percentage of Persons with Chronic Conditions by Age and Sex 1974

Per

cent

aae

497 5 0 shy

431

40 shy

30 shy

253

230

2 0 shy

1 0 - 92 86

40 33

0 shy

Under 17 17-44 45-64 65 and Over

AgeSex Group

Female

Male

HEALTH CARE FINANCING REVIEW SPRING 1980 6 9

FIGURE 2 Hospital Discharge Rate by Age and Sex Total and Those Attributable to Persons

with Chronic Conditions 1974 D

isch

arg

e

Rat

e pe

r 1

000

Popula

tion

300shy

281

240shy 235

211 204

180shy181

169 163

120shy106

93

60 shy66

75 80

39 29

7 8

0 -Female Male

Under 17

Female Male

17-44

Female | Male

45-64

Female] Male

65 and Over

AgeSex Group

Chronic Conditions

Total Conditions

7 0 HEALTH CARE FINANCING REVIEW SPRING 1980

Medicare

With the implementation of Medicare in 1966 short-stay hospital admission rates for persons aged 65 andover increased rapidly To isolate age-related biological factors from other factors in the use of medical services Figure 3 was developed The figure displays the proportion of the aged population which had at least some hospital expense paid by Medicare for the years 196719681969 and 1976 The effect of biological age-related factors underlying hospitalizashytion rates is approximated by the slopes of the lines which show an increase of about 31 percent for each year after age 66 Although the rate of use by all pershysons (Figure 3) did not change over the early period hospitalization rates for all aged persons under Medicare did increase The vertical distances betweenthe lines in Figure 3 represent changes in overall hospitalization rates and reflect factors other than age-related biological ones

Figure 4 indicates that the Medicare program made hospital care affordable to the elderly and that the resulting influx of the aged into hospitals temporarily displaced younger patients Following that initial surge Medicare admission rates stablilized at about 300 per 1000 beneficiaries from fiscal year 1969 through fiscal year 1971 after which admission rates increased at a rate of two percentage points per year Admission rates for persons under age 65 increased sharply in 1970 and again between 1972 and 1974 before stabilizing

Hospital stays involving some surgery for persons aged 65 and over also increased but at a different rate In the early period from 1965 to 1972 hospital discharges with surgery per 1000 Medicare beneficiaries increased at an annual rate of 18 pershycent From 1972 to 1976 this surgical rate increased 29 percent annually

Upward trends in hospitalization and surgical rates for the aged are also associated with a shift in physishycians Medicare charges for services performed outshyside the hospital to services performed in the hospital as shown in Table 5

Evidently this shift in physicians charges from out-of-hospital to in-hospital care is related to increasing hospitalization rates and surgical rates Physicians charges are generally higher for hospital visits than for out-of-hospital visits and average physicians surgical charges generally far exceed average chargesfor other types of service Both out-of-hospital visits to physicians and the number of hospital days used per capita by aged persons remained relatively stable during the period 1971 through 1977 Total physician

visits did not change significantly but inpatient visits and surgical services as a proportion of total visits inshycreased leading to a shift in physicians charges toward more expensive types of care

Medicaid Changes in the Medicaid program may also help exshy

plain the variation in admission rates shown in Figure 4 The Medicaid program formally begun in January 1966 is a joint State-Federal program in which States participate at their option Ail but two States joined the program between 1965 and 1970 Alaska joined in fiscal year 1973 Arizona is the only State without a Medicaid program The last major influx of Medicaid participants occurred in January 1970 when seven States joined the program

The number of persons under age 65 eligible for Medicaid due to disability increased significantly betshyween 1969 and 1970 These persons are extensive users of hospital care and their enrollment in Medicaid partially explains the increase in admission rates for persons under age 65 in 1970mdasha year in which admission rates for aged persons did not change

The Economic Stabilization Program

The resumption of increases in hospital admission rates for aged persons increasing surgical hospitalizations a shift of physicians charges toward care in the hospital and an increase in admission rates for persons under age 65 coincided with the start of the Economic Stabilization Program (ESP) in fiscal year 1972 For most of its effective life the ESP restricted increases in hospital costs per admission and physicians charges per procedure but did not restrict increases in hospital admissions or in total physicians services Since the ESP had no effective limitation on the volume of services one interpretashytion of the data is that hospitals and physicians responded to the ESP requirements by allowing hospital admission rates to increase

After the ESP ended in early 1974 overall admission rates seemed to stabilize although admission rates for aged persons continued to increase

Changes in the rate of surgical operations per capita paralleled changes in admission rates over the period 1967-1978 Surgical rates per capita increased at an annual rate of 18 percent from the year ending in June 1967 to 1971 they increased at an annual rate of 32 percent from 1971 through 1974 and have decelerated to an annual rate of increase of 21 pershycent since 1974 [AHA Panel Survey]

TABLE 5 Physicians Services Charges Under Medicare for Persons Aged 65 and Over for Selected Calendar

Years 1971-1977 (amounts in billions)1

1971 1972 1976 1977

Amount Percent Amount Percent Amount Percent Amount Percent

Allowed ChargesInpatient Hospital

Out-of-Hospital1

$28 16

12

1000 568

432

$30 17

13

1000 576

424

$50 30

20

1000 600

400

$59 36

23

1000 607

393

1 Excludes outpatient hospital billing for physicians services Source Current Medicare Surveys

HEALTH CARE FINANCING REVIEW SPRING 1980 71

FIGURE 3 Persons Hospitalized per 1000 Medicare Beneficiaries by Age

Calendar Years 19671968 1969 and 1976 P

erso

ns H

osp

italiz

ed

per

10

00 B

enefic

iaries

300

250

1976

1969

bull 1968

bull 1967

200

150

100 66 68 70 72 74 76

Age

78 80 82 84

7 2 HEALTH CARE FINANCING REVIEW SPRING 1980

FIGURE 4 Short-Stay Hospital Admission Rates for Selected Populations

Years Ending June 1967-78

350

Adm

issi

ons

per

100

0 P

opul

atio

n

330shy

310

290

250shy

170shy

150shy

130shy

110shy

Total Population

Persons Under Age 65

Medicare Admissions Age 65 and Over

1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978

HEALTH CARE FINANCING REVIEW SPRING 1980 7 3

The Cost of Living Council in its evaluation of the early part of the ESP program reported that controls on hospital charges shifted the burden of increasing hospital expenses toward cost reimbursement proshygrams such as Medicare and Medicaid and away fromcharge reimbursement payment mechanisms such as private insurance Because Medicare and Medicaid serve mainly the aged and children while charge reimshybursement serves many of the 19 to 64 age group the early ESP regulations tended to shift increasing hospital costs to the aged and those 18 and under This affected the age distribution of hospital care exshypenses

Channels of Payment

PUBLIC CHANNELS

Public funding of health care for all age groups has been shifting from State and local governments to the Federal government In 1965 the main sources of public financing of health care were State and local governments which provided over half of the $79 billion in public money spent for health care Most of these non-Federal public funds were spent for the mid-age group which comprised the largest proportion of persons in non-Federal government psychiatric hospitals By 1970 the State and local share of public health care spending had declined to 35 percent and

by 1978 the share was down to 29 percent The decline in the percentage of health care spending by State and local governments may be traced to two factors the growth of Federal programs which parshytially replaced State and local public assistance spending for medical care and the decrease in populashytions of State and local governmental psychiatric hospitals The Federal share of total public health care spending grew from 48 percent in 1965 to 71 pershycent in 1978 Between 1965 and 1978 inclusively the Federal share grew from 51 percent to 86 percent for the aged from 43 percent to 57 percent for the midshyage group and from 61 percent to 66 percent for pershysons under age 19 The distribution of total personal health spending in 1978 by age group and source of public payment is displayed in Figure 5

In 1965 the Veterans Administration the Departshyment of Defense and workers compensation also proshyvided health caremdashmainly for the mid-age group These programs spent $275 billion and accounted for 35 percent of all public spending in 1965 In 1978 they spent $116 billion but their share of public spending diminished to 17 percent reflecting the rapid growth in Medicare and Medicaid spending Public financing as a percent of all health care funding grew rapidly after the introduction of Medicare and Medicaid in 1966 but more recently appears to have stabilized for all age groups (Table 6) Although public funding of personal health care expenditures continues to grow State and local funding as a percent of total expenshyditures had declined

TABLE 6

Percentage Distribution of Funding for Personal Health Care for Selected Calendar Years 1965 to 1978

Age Group 1978 1977 1970 1970 1965

All Ages Total 1000 1000 1000 1000 1000

Private 613 610 609 659 789 Public 387 390 391 341 211

Federal 277 276 275 222 101 State and Local 110 114 116 120 110

Under age 19 Total 1000 1000 1000 1000 1000

Private 713 715 711 761 845 Public 287 285 285 239 155

Federal 189 187 193 142 94 State and Local 98 98 97 97 61

Ages 19-64 Total 1000 1000 1000 1000 1000

Private 714 712 711 754 808 Public 286 288 289 246 192

Federal 162 160 160 111 83 State and Local 124 128 128 135 110

Ages 65 and Over Total 1000 1000 1000 1000 1000

Private 368 361 355 388 701 Public 632 639 645 612 299

Federal 542 547 547 513 154 State and Local 89 92 98 99 144

HEALTH CARE FINANCING REVIEW SPRING 1980 74

FIGURE 5 Percentage Distribution of Personal Health Care Expenditures by Source of Funds and Age Group

Calendar Year 1978

$986 billion

72

$494 billion

37

9

$199 billion 12

54 71

16 10 19

Under 19 19-64 65 and over

Age Group

Private

State and Local Government

Federal Government

HEALTH CARE FINANCING REVIEW SPRING 1980 7 5

Medicare and Medicaid

Two-thirds of all public financing of health care is provided by Medicare and Medicaid Although Medicare finances health care primarily for aged pershysons Medicaid finances health care for all ages as shown by Table 7

TABLE 7 Percent of Total Personal Health Care

Expenditures Financed by Public Programs 1978

Age Group Medicare Medicaid Other

All ages 148 109 130 Under 19 2 158 127 19-64 32 87 167 65 and Over 441 134 57

Medicare In 1978 Medicare provided 44 percent of all health

care costs for the aged compared to 39 percent in 1970 Part of this increase can be attributed to the risshying proportion of hospital care funded by Medicare Medicare paid 71 percent of hospital care costs in 1970 and 75 percent in 1978 This increase was not due to explicit policy decisions It resulted from changes in the mix of psychiatric and non-psychiatric hospital care Between 1955 and 1978 the average daily census in psychiatric hospitals fell from 677000 patients to 190000 patients the age distribution of the average daily census remained fairly constant Consequently community hospital days grew as a share of total hospital days for the aged This increasshying proportion of more highly reimbursed care has caused the increase in the Medicare share of total hospital care for the aged

The proportion of physician expenses paid by Medicare also has increased This occurred because the Medicare annual deductible increased from $50 to $60 in 1973 but has not changed since despite rapid increases in allowed charges for physicians care Table 8 shows that from 1971 to 1977 the deductible expense for physicians services under Medicare decreased from about 19 percent to 12 percent of all allowed charges

TABLE 8 Physicians Services Percentage Distribution of Reimbursements Coinsurance and Deductibles

Selected Calendar Years 1971-1977

1977

Percent

Allowed Charges 1000

Reimbursement 707Coinsurance 177Deductible 116Source Unpublished HCFA data

Medicaid

Medicaid pays a significant part of hospital and physician care costs for persons under age 19 In 1977 about a fourth of all hospital spending and about one dollar of every eight spent for physician care for this group was financed by Medicaid (Table 9) Medicaid paid 39 percent of nursing home costs for persons aged 65 and over in 1978 It appears that the proportion of nursing home care costs paid by Medicaid and Medicare has been decreasing in recent years

In 1978 the program spent $86 billion for persons aged 19 to 64 which represented 47 percent of total Medicaid expenditures Two groups of Medicaid recishypients in this mid-age range accounted for most of these expenditures disabled persons under age 65 who comprised about one-ninth of all Medicaid recishypients but for whom about one-fifth of all Medicaid expenditures were made and adults in families with dependent children who comprised about one-fifth of all Medicaid recipients and for whom about one-sixth of all Medicaid expenditures were made

197(5 1972 1971

Percent Percent Percent

1000 1000 1000

688 175 127

655 164 181

650 162 188

THE INTERACTION OF PRIVATE AND PUBLIC CHANNELS

Direct or out-of-pocket payments and private inshysurance financed most health care costs for younger age groups while public monies dominated funding for aged persons Major channels of payment for all age groups in 1977 are shown in Table 9 by selected types of medical care

Hospitals were the major recipients of public and private funding for health care receiving 34 percent of private funds and 63 percent of public funds The changing structure of source of payment for hospital care is an important determinant of public and private health care funding policy Although no comprehenshysive survey of sources of payment for hospital care by age group is available data from various public and private sources may be merged to estimate the flow of funds by age group in the hospital industry Table 10 represents this flow of funds for the years 1970 and 1977 Medicare provided an increasing share of

HEALTH CARE FINANCING REVIEWSPRING 1980 76

FIGURE 6 Per Capita Personal Health Care Expenditures for the Aged

by Source of Funds and by Type of Care Calendar Year 1978

$2026

Private $746

Other Public $115|

Programs

Medicaid $271

$869

$109 $792

Medicaid $81

-$31

$490

Medicare $893

$366

$648 $149 $30

Medicare $3

-$11 $230

$2031

bull$42

Total Hospital Physicians All Other Care Services

HEALTH CARE FINANCING REVIEW SPRING 1980 7 7

TABLE 9

Percentage Distribution of Health Care Expenditures by Channels of Payment for Hospital Care Physicians Services and All Other Health Care Services Calendar Year 1977

Private Public

Private Direct Health

Age Group Total Total Payments Insurance Other Total Medicare Medicaid Other

All Personal Health Care All Ages 1000 610 318 279 13 390 146 112 132 Under 19 1000 715 381 327 7 285 1 156 128 19-64 1000 712 319 374 19 288 30 89 169 65 and Over 1000 361 291 66 4 639 442 138 59

Hospital Care All Ages 1000 456 83 362 11 544 239 95 210 Under 19 1000 546 37 507 2 454 mdash 250 204 19-64 1000 592 107 469 16 408 49 96 263 65 and Over 1000 120 46 71 3 880 747 39 94

Physician Care All Ages 1000 741 339 401 1 259 147 60 52 Under 19 1000 844 387 457 mdash 156 4 121 31 19-64 1000 845 357 486 1 155 24 56 75 65 and Over 1000 418 262 155 mdash 582 542 31 9

All Other Care All Ages 1000 739 625 90 24 261 19 167 75 Under 19 1000 785 702 69 15 215 - 92 123 19-64 1000 812 634 140 38 188 2 102 84 65 and Over 1000 606 580 19 7 394 53 299 42

community and related hospital spending and private insurance declined due to the extension of Medicare coverage to certain disabled persons under age 65

The proportion of hospital spending for the aged paid by Medicare decreased slightly over the period According to Medicare actuaries more than a million persons aged 65 and over are ineligible for hospital inshysurance under Medicare These persons are predominantly retired government employees whose private insurance continues at retirement and covers most of their physician and hospital care

DIRECT PAYMENTS BY PERSONS AGED 65 AND OVER

Out-of-pocket payments for health care continue to be a major expense for aged persons In 1977 pershysons aged 65 and over paid 29 percent of their health care costs out-of-pocket The amounts paid out-ofshypocket vary considerably by the type of care provided

The out-of-pocket liability of the elderly for hospital care has changed dramatically since 1965mdashthe year before Medicare and Medicaid began About 13 pershycent of spending for hospital care was paid out-ofshypocket in 1965 compared to less than five percent by 1977

The elderly make out-of-pocket payments for physishycians care for that part of the deductible and coinshysurance not paid by Medicaid or private insurance for physicians charges not allowed by Medicare but colshylectable from beneficiaries and for medical services not covered by Medicare Physicians billings to pashytients for charges denied by Medicare because the charges exceed the allowed amounts add a signifishycant amount to patients liabilities generally not covered by private insurance Through 1976 the percentage of total physicians charges paid by Medicare declined because of the growing obligations of Medicare beneficiaries for physicians charges on unassigned claims that were submitted by physishycians but disallowed These disallowed charges to beneficiaries increased from two percent of the total physician bill for the aged in fiscal year 1968 to about 10 percent in calendar year 1976 where they remained through 1978 In dollar terms these out-of-pocket exshypenses for physicians services were about $84 per capita in 1977 and preliminary estimates indicate that the costs will rise to about $96 per capita in 1978

Payment for nursing home care represents the largest health care liability for persons aged 65 and overmdashestimated at $271 per capita in 1978 up from $228 in 1977 and $109 in 1970 About 52 percent of nursing home care was financed out-of-pocket by beneficiaries in 1978

HEALTH CARE FINANCING REVIEW SPRING 1980 78

TABLE 10

Hospital Expenditures and Percentage Distribution of Channels of Payment by Type of Hospital and Age Group Calendar Years 1970 and 1977 (Dollar amounts In millions)

1977 1970

65 and 65 and Total Under 19 19-64 Over Total Under 19 19-64 Over

Psychiatric Hospitals (non-Federal) $4015 $199 $2632 $1184 $2534 $81 $1710 $744 State and Local Hospitals

Sources of Payment-Total 1000 100-0 1000 1000 1000 1000 1000 1000 Medicare 17 mdash 4 49 5 mdash mdash 16 Medicaid 187 347 153 236 110 37 5 359 Other Federal 15 70 15 5 15 99 15 5 Other State and Local 446 85 465 465 701 741 791 489 Private Health Insurance 140 412 180 6 10 37 12 1 Direct Payment 195 85 183 239 159 86 176 129

Private Hospitals $661 $33 $433 $195 $258 $8 $174 $76

Sources of Payment-Total 1000 1000 1000 1000 1000 1000_ 1000 1000 Medicare 17 - 5 46 35 mdash mdash 118 Other State and Local 11 30 12 5 19 mdash 29 mdash Private Health Insurance 700 848 774 508 481 375 483 487 Philanthropy 39 30 39 41 39 125 34 39 Direct Payments 234 91 171 400 426 500 454 355

Federal Hospitals $6099 $747 $4595 $757 $2822 $499 $2025 $349

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Veterans Administration 586 - 636 856 533 mdash 599 828 Department of Defense 322 631 312 83 380 835 328 92 Other 92 369 52 61 88 165 73 80

Other Hospitals $57139 $5572 $34806 $16761 $22184 $2901 $13397 $5885

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Medicare 282 1 60 838 223 mdash - 842 Medicaid 99 281 105 27 88 169 99 23 Workers Compensation 23 mdash 37 2 23 mdash 38 3 State and Local Public Assistance 7 3 11 2 9 11 11 2 Other State and Local 59 13 86 19 70 95 87 19 Department of Defense 7 18 9 1 11 30 11 1 Other Government Programs 15 66 10 6 9 23 10 1 Philanthropy 12 3 19 2 15 5 19 10 Private Health Insurance 412 576 548 76 444 588 585 54 Direct Payments 83 40 115 28 107 80 140 44

Payments for drugs and drug sundries and for denshytists services are another major expense Precise dollar amounts for these payments are not currently available although surveys now under way will proshyvide estimates of out-of-pocket expenses for these types of care as well as for other health services Out-of-pocket spending for drugs and dentists sershyvices is estimated at $150 per capita in 1977 and $160 in 1978

Medicare Supplementary Medical Insurance (SMI) and private health insurance premiums are also paid out-of-pocket at a rate of $78 per capita for SMI and $90 per capita for private health insurance Persons aged 65 and over paid an average of about $698 for health related services and items out-of-pocket in 1977mdashrepresenting 12 percent of their $5900 average income

Conclusions Spending for health care varies significantly by age

group Per capita health spending increases steadily with age for most health care sectors

Young persons are spending a decreasing share of the health dollar because they are declining as a pershycent of the total population Private sources of payshyment provide most of the health expenses for the young

The middle age group spends most of the health care dollar because it is the largest age group Most health expenses for this group are paid by private sources

Persons aged 65 and over continue to increase steadily as a percent of the total population The health care needs of these persons shown by current use of various sectors of health care are expected to

HEALTH CARE FINANCING REVIEW SPRING 1980 79

grow along with their numbers resulting in an inshycreasing share of personal health care spending for and by the elderly Public financing has been and conshytinues to be the major source of funding for personal health care costs for the aged As the aged populashytion continues to grow in the future the need for public financing of health care costs is expected to increase especially for those types of care which aged persons use more oftenmdashhospital care physishycians services and nursing home care The populashytion within the age group 65 and over is aging and is expected to add to the need for health care services especially nursing home care Health care policy and financing must continue to cope with these trends which are expected to continue for many years to come

AcknowledgmentsThe author is indebted to Mary E Rieder Acting Director

of the Division of National Cost Estimates to members of the Division of National Cost Estimates and Intern Karen Young for their comments and suggestions and to Joanie Henderson and Ann Leake for secretarial assistance

Technical Note A

CONCEPTS AND DEFINITIONS

All estimates in this report relate to personal health care expendituresmdashthat portion of the total national health care expense representing health services and supplies received directly by individuals They make up total national expenditures for health together with spending for research and medical facilities conshystruction identifiable administrative costs of governshyment programs government public health activities expenses incurred by philanthropic organizations in raising funds for health care and the net costs of private health insurance (the difference between premiums and benefit payments)

All expenditures for health care that are channeled through any program established by public law are treated as public expenditures in these estimates Exshypenditures under workers compensation programs for example are included with government expenshyditures although they involve benefits paid by private insurers from premiums collected from private sources

Funds disbursed by public programs are reported as program expenditures even for example when they include significant private contributions made by beneficiaries as in the Supplementary Medical Inshysurance (SMI) program The benefit expenditures reported in this series are not adjusted to eliminate the duplication that exists when payments are made by State governments into the Medicare trust fund in the form of SMI premiums for public assistance and Supplemental Security Income (SSI) recipients and they are reported as Medicaid expenditures The amount paid by Medicaid as premiums in 1978 was $288 million for all beneficiaries that portion not reshytained in the trust fund is duplicated as a Medicare expense The amount does not noticeably affect the relationships that are reported

Health expenditures by State and local governshyments that involve funds received from the Federal government under revenue sharing are reported as State and local expenditures not as Federal expenshyditures These funds amounted to $232 million in the first half of fiscal year 1976 the latest period for which data are available No information is available on the use of such funds by specific programs

Responsibility for compiling estimates of national health care spending now resides with the Health Care Financing Administration (HCFA) Department of Health and Human Services Definitions of the various types of health care and descriptions of the public programs are contained in the various articles in the series carrying estimates for expenditures (Gibson 1979 Carroll 1979)

It should be noted that hospital care includes all exshypenditures for care in hospitalsmdashboth inpatient and outpatient The data cover all services and supplies provided

Population estimates used here are selected to corshyrespond to the population covered by expenditure estimates Since national health expenditures cover all spending for or by United States citizens and residents population estimates include the institushytionalized population the Armed Forces (both in the United States and overseas) Federal civilian employees overseas and the civilian population of outlying areas

The group under age 19 presents some problems in connection with the available demographic informashytion on utilization and expenditures Extensive intershypolation is often required to estimate certain types of expenditures for this group Because of the nature of some data sources expenses for certain persons under age 19 who are part of the labor force are not separable from those aged 19 to 64 and expenses of dependent children over age 18 are included with those of the younger group

Technical Note B

The Health Interview Survey (HIS) which provided the data for Table 2 continuously samples members of households It was not intended to obtain complete information on the deceased nor on the six percent of the aged population who are institutionalized Thus Table 2 tends to underestimate the volume of services used by the aged The degree of this underestimation can be evaluated by comparing the statistics in Table 2 to other data A 1973 study (the latest available) determined that six percent of the aged population is institutionalized in psychiatric and long-stay hospitals or nursing homes Institutionalized persons had more frequent admissions and a longer average length of stay than did the noninstitutionalized elderly [Deacon 1977] This study also determined that the institushytionalized elderly used 25 times more physician sershyvices and twice as many drug prescriptions per capita than did their noninstitutionalized counterparts Thus Table 2 significantly underestimates hospital use by the elderly

HEALTH CARE FINANCING REVIEWSPRING 1980 80

It is also necessary to evaluate peoples health exshypenditures in the year of their death to assess the underestimate of the values in Table 2 The Health Inshyterview Survey captures only about half of the health care use of persons dying in the survey year The following table presents the disproportionate share of Medicare dollars spent for aged persons who died in 1976

Technical Note C

Table A Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Years 197819771976 19701965

Table B Estimated Personal Health Care Expenshyditures under Public Programs by Type of Expenditure and Source of Funds for Three Age Groups for Calendar Years 19781977 1976 1970 1965

Table C Expenditures for Health Services and Supshyplies under Public Programs by Program for Three Age Groups for Calendar Years 1978 19771976 1970 1965

Table D Estimated Amount and Percentage Distribution of Personal Health Care Exshypenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 197819771976 1970 1965

Distribution of Medicare Expenditures for Persons Who Died in 1976

Percent of Medicare Percent of Total Recipients Who Died Medicare Dollars

Age Group in 1976 Spent for Those Recipients

All ages 65 and Over 79 207

65-69 40 15370-74 58 18575-79 80 20380-84 118 24985 and Over 198 321

Source Unpublished HCFA data

TABLE A

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1978

All Ages Under 19 19-64 65 and Over

Type of Expenditure Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate amount (in millions)

Total $167911 $102870 $65042 $19875 $14180 $5696 $98668 $70497 $28172 $49366 $18192 $31175

Hospital Care 76025 35107 40919 7070 3835 3235 47785 28626 19159 21169 2645 18524 PhysiciansServices 35250 25811 9439 5215 4382 833 21124 17808 3316 8910 3620 5290 Dentists Services 13300 12761 539 2780 2546 234 9137 8876 261 1383 1338 45 Other Professional Services 4275 3303 972 398 193 205 2787 2480 307 1090 631 459 Drugs and Drug Sundries 15098 13798 1300 2823 2650 173 9044 8419 625 3231 2728 503 Eyeglasses and Appliances 3879 3522 357 481 459 22 2793 2659 134 605 405 201 Nursing-Home Care 15751 7394 8358 68 1 67 3057 600 2457 12624 6790 5834 Other Health Services 4333 1175 3158 1040 113 927 2941 1028 1913 354 35 319

Per Capita Amount Total $75298 $46131 $29167 $28607 $20410 $8199 $76396 $54584 $21813 $202619 $74668 $127955

Hospital Care 34093 15743 18350 10176 5520 4656 36998 22164 14834 86886 10856 76030 PhysiciansServices 15808 11575 4233 7506 6307 1199 16356 13788 2567 36570 14858 21712 DentistsServices 5964 5723 242 4001 3665 337 7075 6872 202 5676 5492 185 Other Professional Services 1917 1481 436 573 278 295 2158 1920 238 4474 2590 1884 Drugs and Drug Sundries 6770 6187 583 4063 3814 249 7002 6519 484 13261 11197 2064 Eyeglasses and Appliances 1740 1579 160 692 661 32 2162 2059 104 2483 1662 825 Nursing-Home Care 7064 3316 3748 100 01 96 2367 465 1902 51814 27869 23945 Other Health Services 1943 527 1416 1497 163 1334 2277 796 1481 1453 144 1310

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 453 341 629 356 270 568 484 406 680 429 145 594 PhysiciansServices 210 251 145 262 309 146 214 253 118 180 199 170 Dentists Services 79 124 8 140 180 41 93 126 9 28 74 1 Other Professional Services 25 32 15 20 14 36 28 35 11 22 35 15 Drugs and Drug Sundries 90 134 20 142 187 30 92 119 22 65 150 16 Eyeglasses and Appliances 23 34 5 24 32 4 28 38 5 12 22 6 Nursing-Home Care 94 72 129 3 mdash 12 31 9 87 256 373 187 Other Health Services 26 11 49 52 8 163 30 15 68 7 2 10

8 1 HEALTH CARE FINANCING REVIEW SPRING 1980

TABLE 1

Distribution of Population and of Personal Health Care Spending by Age Group 1978

Health Care Per Percentage Distribution Age Spending Population Capita Health Care

(billions) (millions) Spending Spending Population

All Ages $1679 2230 $ 753 1000 1000

Under 19 199 695 286 119 312 19-64 987 1292 764 588 579 65 and Over 494 243 2026 294 109

factors as average price per service is assumed not to vary by age For example a flu shot should cost the same for a 19-year old or for an 80-year old pershyson Variations in health care expenditures by age group due to differences in volume and in intensity are examined for hospital care physicians services drugs and nursing home care

Hospital Care

Hospital care expenditures comprised the major health care expense category for all age groups in 1978 Yet the percentage of total health expenditures for hospital care varies significantly by age group Hospital care comprises 36 percent of all expenshyditures for persons under age 19 48 percent for pershysons aged 19 to 64 and 43 percent for persons aged 65 and over

Hospital expenditures per capita increase with age The $869 per capita hospital expenditure of the aged is more than eight times the $102 per capita expenshyditure for the young and more than twice the $370 per capita spent for persons aged 19 to 64

One method of evaluating this variation in hospital expenditures is to examine the volume of services used According to the 1978 Health Interview Survey (HIS) conducted by the National Center for Health Statistics (NCHS) both the percentage of each age-group hospitalized in short-stay hospitals and the number of hospital days used by each group inshycreases with age [NCHS 1978] About five percent of persons under age 17 were hospitalized in 1978 comshypared to over 18 percent of persons aged 65 and over Ten percent of all persons were hospitalized at least once in 1978 (Table B) The annual number of hospital days used ranged from an average of about six days per user for the youngest age group to an average of about 16 days per user for the HIS sample of persons 65 and over Because of limitations in the HIS survey estimates of hospital use by the elderly are significantly understated1

1The Health Interview Survey (HIS) which provided the data for Table 2 continuously samples members of households It is not intended to provide complete inshyformation on the deceased or on the institutionalized population Thus Table 2 tends to underestimate the volume of services used by the aged [See Appendix B for a complete discussion of this issue]

Another method of evaluating the variations by age in hospital expenditures is to examine the intensity of care One measure of the age-relative intensity of hospital care is the variation by age group in charges per day A study byNCHS for the years 1968-1970 (the last years for which such information was collected for the general population) showed that the average charge per day of care for the youngest persons was about the same as that for all hospital users The average charge per day for the middle age group was about six percent more than the overall average and that for the elderly was eight percent less (Hospital Discharge Survey 1974) Thus although the aged use far more hospital days per capita than do younger pershysons the average intensity of care per hospital day is less Given the relatively small variation in the intensishyty of hospital care it should be concluded that volumemdashthe number of hospitalizations per capita and the average length of hospital staymdashis the domshyinant factor in the differences by age in spending for hospital care

Physicians Services

Care by physicians represents a significant proporshytion of the health care dollars for all age groups As a share of total spending for health care physicians care ranks second to hospital care for the younger age groups and third (after hospital and nursing home care) for the aged

The percentage of the population making at least one visit to a physician per year does not vary significantly with age Over 85 percent of the populashytion received physicians services in 1978 (NCHS 1979) However age-related variations both in the number of visits per year and consequently in annual per capita expenditures is observed In 1978 the average number of out-of-hospital visits to physicians by persons under age 17 was 41 compared to an average of 63 visits by persons 65 and over The per capita expenditures for physicians services in 1978 ranged from $ 75 for young persons to $366 for pershysons aged 65 and over

To further evaluate the relationship of age to expenshyditures for physicians services intensity of service has been compared by age group One measure of the relative intensity of physicians services is the average duration of a visit The National Ambulatory Care Survey for 1975 showed that the mean time per visit was greater for older patientsmdash12 minutes for persons under age 16 compared to 15 minutes for all

HEALTH CARE FINANCING REVIEWSPRING 1980 66

TABLE 2

Percent of Persons Hospitalized Days per Patient Physician and Dental Visits per Capita Noninstitutionalized Persons by Age Group 1978

Percent of PersonsHospitalized

Short-Stay Hospital Days per Patient

Physician Visits

per Capita Dental Visits

per Capita

Age Group Total Men Women Total Men Women

All Persons 104 85 122 97 110 88 48 16 Under 17 53 56 50 64 64 65 41 16 17-2425-44

106 113

62 69

148 154

58 73

72 89

52 66

43 47

15 17

45-6465 and Over

121 180

118 192

124 172

123 156

129 172

119 144

53 63

17 12

Source Current Estimates from the Health Interview Survey

other age groups This survey also showed that more older persons tend to have visits in which drugs are prescribed injections given and blood pressure checked The relative number of surgical operations by age group is another measure of the variations in the complexity or intensity of physicians services In 1977 the Hospital Discharge Survey showed that the number of surgical operations in hospitals was greater for older persons There were 41 per 1000 pershysons under age 15 and 166 operations per 1000 pershysons aged 65 and over [NCHS 1979] Thus the intenshysity of a physician visit as well as the number of visits and the per capita expenditure for physician services are greater for older persons

Prescription Drugs and Drug Sundries

Along with short-stay hospital and physician care prescription drug usage varies with age These drug expenditures represent nine percent of personal health care expenditures for the total population They constitute 14 percent of the expenditures for persons under age 19 9 percent for persons 19-64 and seven percent for persons 65 and over In 1978 per capita spending for prescription drugs ranged from $41 for those under age 19 to $133 for the aged Similarly the number of prescriptions per capita and the intensity of a prescription (measured by average price) also inshycreased with age The following table shows spending for drugs by age group It is based on a 1973 NCHS survey adjusted to include institutionalized and deceased persons

TABLE 3 Prescriptions per Capita and Average Price

per Prescription 1973

Age Group Prescriptions Average Price per Capita per Prescription

0-16 32 $33917-24 42 37725-44 56 43345-64 87 50965 and over 144 509

Source (Trapnell 1979)

HEALTH CARE FINANCING REVIEW SPRING 1980

Dental Care

Unlike other categories of care spending for dental care does not increase directly with age The number of dental visits per person by age group remains relatively constant for persons under age 65 and decreases for older persons

According to the Health Interview Survey only 40 percent of the aged population reported visiting a denshytist in 1977 compared to over 60 percent of the other age groups Dental care expenditures accounted for 9 percent of total health care costs for persons aged 19 to 64 but for only three percent of total spending for the aged group However it should be noted that the intensity of dental services measured by the average charge per dental visit is greater for older persons Thus although the aged make fewer dental visits than do others their visits are more costly

Nursing Home Care

Nursing home use is dominated by the aged or near-aged The National Nursing Home Survey (NNHS) shows that persons 65 and over comprised 86 percent of the nursing home population in 1977 Persons in the 55 to 64 age group accounted for an additional eight percent of nursing home residents As expected in 1978 nursing home care was second to hospital care as the most expensive health item for persons aged 65 and over The per capita expenditure was $518mdashone-fourth of the total health care spending for that age group

Causes of Increased Health Care Spending with Age

Except for dental care the number of contacts with health care providers increases with age Much of this increase is due to degeneration associated with aging shown in chronic diseases and physical impairshyment requiring frequent health care services One measure of degeneration is a persons subjective assessment of the degree to which a chronic condishytion is limiting his or her activity

67

The percentage of persons reporting limitation of activity (in the Health Interview Survey for 1974) acshycelerates with age and accelerates faster for men than for women (Figure 1) As people age an increasshying proportion suffers from some chronic condition reshyquiring medical attention

The 14 percent of the population who suffered a chronic condition accounted for 37 percent of all short-stay hospital discharges for 55 percent of all short-stay hospital days and for 28 percent of all out-of-hospital physician visits Chronically impaired pershysons account for an increasing share of hospital discharges as age increases (Figure 2)

For males each percentage point increase in the proportion of an age group suffering a chronic condishytion (Figure 1) is associated with an increase of 45 hospital discharges per 10000 persons For females a percentage point increase in the same proportion is associated with an increase of 38 hospital discharges per 10000 persons In the group aged 65 and over people with chronic conditions account for most of the hospitalization

The acceleration of the incidence of chronic condishytions shown in Figure 2 and of the implied use of health services related to these conditions is understated because two groups who use many health services are excluded institutionalized pershysonsmdashwho are limited in activity by definitionmdashand people who died before the survey

Increasing use of health care services associated with increases in chronic conditions are rooted in age-related degeneration of biological functions Accorshyding to one study each year of life after age 30 is acshycompanied by slightly less than one percent degeneration in a composite of ones functional capacity (Strehler 1977) This steady rate sets the stage for increasing death disease and impairment which are directly associated with health care use rates

TRENDS IN HEALTH CARE SPENDING Demographic Shifts

Personal health care spending for older people is rising as a percentage of the total and that for young people is falling as shown in Table 4

This trend results in part from the decrease in the proportion of the population under age 19mdasha decrease which began around 1965 Thirty-eight percent of the

population was under age 19 in 1965 the percentage dropped to 31 percent by 1978

This aging of the population tends to increase the intensity and therefore the costs of health care As shown previously health care for the young is generally less intense than for older age groups Therefore as the percent of total contacts with health care providers by the young diminishes due to their declining relative and absolute numbers the average intensity of service for the total population increases

Changes in fertility rates have affected hospitalizashytion rates for the child-bearing age group Hospital days of care for deliveries dropped 37 percent beshytween 1967 and 1977 from 410 days per 1000 females aged 15 to 44 in 1967 to 259 days in 1977 Decreasing birth rates also imply fewer physician visits and less prescription drug spending for this group (NCHS 19671977) This has a dual effect on health care use it reduces the number of persons needing health care and the number of women needing obstetrical care

Aging of the Aged

Within the group aged 65 and over the proportion of the very old is increasing Persons aged 85 and over comprised about 59 percent of the total populashytion of the nation in 1965 and 87 percent in 1978mdasha trend which may continue for some years

The impact of this trend on health care costs is significant In 1976 under Medicare persons aged 85 and over used 5484 days of short-stay hospital care per 1000 persons compared to 3684 days for all pershysons 65 and overmdasha 50 percent higher rate (unshypublished HCFA data) The rate for persons under age 65 was 894 days per 1000 persons Further persons aged 85 and above accounted for 35 percent of all nursing home days of care in 1977 [NNHS 1977] while comprising only eight percent of the population aged 65 and over

IMPACT OF PUBLIC POLICY

The implementation of the Medicare and Medicaid programs and the Economic Stabilization Program [ESP] appear to explain changes in health care use and costs by age groups which are not associated with age-related biological factors

TABLE 4

Percentage Distribution of Personal Health Care Expenditures by Age Group Selected Calendar Years 1965-78

Age Group 1965 1970 1976 1977 1978

All Ages 1000 1000 1000 1000 1000

0-18 171 158 126 122 118 19-64 591 580 589 587 588 65 and Over 238 263 285 290 294

HEALTH CARE FINANCING REVIEW SPRING 1980 68

FIGURE 1 Percentage of Persons with Chronic Conditions by Age and Sex 1974

Per

cent

aae

497 5 0 shy

431

40 shy

30 shy

253

230

2 0 shy

1 0 - 92 86

40 33

0 shy

Under 17 17-44 45-64 65 and Over

AgeSex Group

Female

Male

HEALTH CARE FINANCING REVIEW SPRING 1980 6 9

FIGURE 2 Hospital Discharge Rate by Age and Sex Total and Those Attributable to Persons

with Chronic Conditions 1974 D

isch

arg

e

Rat

e pe

r 1

000

Popula

tion

300shy

281

240shy 235

211 204

180shy181

169 163

120shy106

93

60 shy66

75 80

39 29

7 8

0 -Female Male

Under 17

Female Male

17-44

Female | Male

45-64

Female] Male

65 and Over

AgeSex Group

Chronic Conditions

Total Conditions

7 0 HEALTH CARE FINANCING REVIEW SPRING 1980

Medicare

With the implementation of Medicare in 1966 short-stay hospital admission rates for persons aged 65 andover increased rapidly To isolate age-related biological factors from other factors in the use of medical services Figure 3 was developed The figure displays the proportion of the aged population which had at least some hospital expense paid by Medicare for the years 196719681969 and 1976 The effect of biological age-related factors underlying hospitalizashytion rates is approximated by the slopes of the lines which show an increase of about 31 percent for each year after age 66 Although the rate of use by all pershysons (Figure 3) did not change over the early period hospitalization rates for all aged persons under Medicare did increase The vertical distances betweenthe lines in Figure 3 represent changes in overall hospitalization rates and reflect factors other than age-related biological ones

Figure 4 indicates that the Medicare program made hospital care affordable to the elderly and that the resulting influx of the aged into hospitals temporarily displaced younger patients Following that initial surge Medicare admission rates stablilized at about 300 per 1000 beneficiaries from fiscal year 1969 through fiscal year 1971 after which admission rates increased at a rate of two percentage points per year Admission rates for persons under age 65 increased sharply in 1970 and again between 1972 and 1974 before stabilizing

Hospital stays involving some surgery for persons aged 65 and over also increased but at a different rate In the early period from 1965 to 1972 hospital discharges with surgery per 1000 Medicare beneficiaries increased at an annual rate of 18 pershycent From 1972 to 1976 this surgical rate increased 29 percent annually

Upward trends in hospitalization and surgical rates for the aged are also associated with a shift in physishycians Medicare charges for services performed outshyside the hospital to services performed in the hospital as shown in Table 5

Evidently this shift in physicians charges from out-of-hospital to in-hospital care is related to increasing hospitalization rates and surgical rates Physicians charges are generally higher for hospital visits than for out-of-hospital visits and average physicians surgical charges generally far exceed average chargesfor other types of service Both out-of-hospital visits to physicians and the number of hospital days used per capita by aged persons remained relatively stable during the period 1971 through 1977 Total physician

visits did not change significantly but inpatient visits and surgical services as a proportion of total visits inshycreased leading to a shift in physicians charges toward more expensive types of care

Medicaid Changes in the Medicaid program may also help exshy

plain the variation in admission rates shown in Figure 4 The Medicaid program formally begun in January 1966 is a joint State-Federal program in which States participate at their option Ail but two States joined the program between 1965 and 1970 Alaska joined in fiscal year 1973 Arizona is the only State without a Medicaid program The last major influx of Medicaid participants occurred in January 1970 when seven States joined the program

The number of persons under age 65 eligible for Medicaid due to disability increased significantly betshyween 1969 and 1970 These persons are extensive users of hospital care and their enrollment in Medicaid partially explains the increase in admission rates for persons under age 65 in 1970mdasha year in which admission rates for aged persons did not change

The Economic Stabilization Program

The resumption of increases in hospital admission rates for aged persons increasing surgical hospitalizations a shift of physicians charges toward care in the hospital and an increase in admission rates for persons under age 65 coincided with the start of the Economic Stabilization Program (ESP) in fiscal year 1972 For most of its effective life the ESP restricted increases in hospital costs per admission and physicians charges per procedure but did not restrict increases in hospital admissions or in total physicians services Since the ESP had no effective limitation on the volume of services one interpretashytion of the data is that hospitals and physicians responded to the ESP requirements by allowing hospital admission rates to increase

After the ESP ended in early 1974 overall admission rates seemed to stabilize although admission rates for aged persons continued to increase

Changes in the rate of surgical operations per capita paralleled changes in admission rates over the period 1967-1978 Surgical rates per capita increased at an annual rate of 18 percent from the year ending in June 1967 to 1971 they increased at an annual rate of 32 percent from 1971 through 1974 and have decelerated to an annual rate of increase of 21 pershycent since 1974 [AHA Panel Survey]

TABLE 5 Physicians Services Charges Under Medicare for Persons Aged 65 and Over for Selected Calendar

Years 1971-1977 (amounts in billions)1

1971 1972 1976 1977

Amount Percent Amount Percent Amount Percent Amount Percent

Allowed ChargesInpatient Hospital

Out-of-Hospital1

$28 16

12

1000 568

432

$30 17

13

1000 576

424

$50 30

20

1000 600

400

$59 36

23

1000 607

393

1 Excludes outpatient hospital billing for physicians services Source Current Medicare Surveys

HEALTH CARE FINANCING REVIEW SPRING 1980 71

FIGURE 3 Persons Hospitalized per 1000 Medicare Beneficiaries by Age

Calendar Years 19671968 1969 and 1976 P

erso

ns H

osp

italiz

ed

per

10

00 B

enefic

iaries

300

250

1976

1969

bull 1968

bull 1967

200

150

100 66 68 70 72 74 76

Age

78 80 82 84

7 2 HEALTH CARE FINANCING REVIEW SPRING 1980

FIGURE 4 Short-Stay Hospital Admission Rates for Selected Populations

Years Ending June 1967-78

350

Adm

issi

ons

per

100

0 P

opul

atio

n

330shy

310

290

250shy

170shy

150shy

130shy

110shy

Total Population

Persons Under Age 65

Medicare Admissions Age 65 and Over

1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978

HEALTH CARE FINANCING REVIEW SPRING 1980 7 3

The Cost of Living Council in its evaluation of the early part of the ESP program reported that controls on hospital charges shifted the burden of increasing hospital expenses toward cost reimbursement proshygrams such as Medicare and Medicaid and away fromcharge reimbursement payment mechanisms such as private insurance Because Medicare and Medicaid serve mainly the aged and children while charge reimshybursement serves many of the 19 to 64 age group the early ESP regulations tended to shift increasing hospital costs to the aged and those 18 and under This affected the age distribution of hospital care exshypenses

Channels of Payment

PUBLIC CHANNELS

Public funding of health care for all age groups has been shifting from State and local governments to the Federal government In 1965 the main sources of public financing of health care were State and local governments which provided over half of the $79 billion in public money spent for health care Most of these non-Federal public funds were spent for the mid-age group which comprised the largest proportion of persons in non-Federal government psychiatric hospitals By 1970 the State and local share of public health care spending had declined to 35 percent and

by 1978 the share was down to 29 percent The decline in the percentage of health care spending by State and local governments may be traced to two factors the growth of Federal programs which parshytially replaced State and local public assistance spending for medical care and the decrease in populashytions of State and local governmental psychiatric hospitals The Federal share of total public health care spending grew from 48 percent in 1965 to 71 pershycent in 1978 Between 1965 and 1978 inclusively the Federal share grew from 51 percent to 86 percent for the aged from 43 percent to 57 percent for the midshyage group and from 61 percent to 66 percent for pershysons under age 19 The distribution of total personal health spending in 1978 by age group and source of public payment is displayed in Figure 5

In 1965 the Veterans Administration the Departshyment of Defense and workers compensation also proshyvided health caremdashmainly for the mid-age group These programs spent $275 billion and accounted for 35 percent of all public spending in 1965 In 1978 they spent $116 billion but their share of public spending diminished to 17 percent reflecting the rapid growth in Medicare and Medicaid spending Public financing as a percent of all health care funding grew rapidly after the introduction of Medicare and Medicaid in 1966 but more recently appears to have stabilized for all age groups (Table 6) Although public funding of personal health care expenditures continues to grow State and local funding as a percent of total expenshyditures had declined

TABLE 6

Percentage Distribution of Funding for Personal Health Care for Selected Calendar Years 1965 to 1978

Age Group 1978 1977 1970 1970 1965

All Ages Total 1000 1000 1000 1000 1000

Private 613 610 609 659 789 Public 387 390 391 341 211

Federal 277 276 275 222 101 State and Local 110 114 116 120 110

Under age 19 Total 1000 1000 1000 1000 1000

Private 713 715 711 761 845 Public 287 285 285 239 155

Federal 189 187 193 142 94 State and Local 98 98 97 97 61

Ages 19-64 Total 1000 1000 1000 1000 1000

Private 714 712 711 754 808 Public 286 288 289 246 192

Federal 162 160 160 111 83 State and Local 124 128 128 135 110

Ages 65 and Over Total 1000 1000 1000 1000 1000

Private 368 361 355 388 701 Public 632 639 645 612 299

Federal 542 547 547 513 154 State and Local 89 92 98 99 144

HEALTH CARE FINANCING REVIEW SPRING 1980 74

FIGURE 5 Percentage Distribution of Personal Health Care Expenditures by Source of Funds and Age Group

Calendar Year 1978

$986 billion

72

$494 billion

37

9

$199 billion 12

54 71

16 10 19

Under 19 19-64 65 and over

Age Group

Private

State and Local Government

Federal Government

HEALTH CARE FINANCING REVIEW SPRING 1980 7 5

Medicare and Medicaid

Two-thirds of all public financing of health care is provided by Medicare and Medicaid Although Medicare finances health care primarily for aged pershysons Medicaid finances health care for all ages as shown by Table 7

TABLE 7 Percent of Total Personal Health Care

Expenditures Financed by Public Programs 1978

Age Group Medicare Medicaid Other

All ages 148 109 130 Under 19 2 158 127 19-64 32 87 167 65 and Over 441 134 57

Medicare In 1978 Medicare provided 44 percent of all health

care costs for the aged compared to 39 percent in 1970 Part of this increase can be attributed to the risshying proportion of hospital care funded by Medicare Medicare paid 71 percent of hospital care costs in 1970 and 75 percent in 1978 This increase was not due to explicit policy decisions It resulted from changes in the mix of psychiatric and non-psychiatric hospital care Between 1955 and 1978 the average daily census in psychiatric hospitals fell from 677000 patients to 190000 patients the age distribution of the average daily census remained fairly constant Consequently community hospital days grew as a share of total hospital days for the aged This increasshying proportion of more highly reimbursed care has caused the increase in the Medicare share of total hospital care for the aged

The proportion of physician expenses paid by Medicare also has increased This occurred because the Medicare annual deductible increased from $50 to $60 in 1973 but has not changed since despite rapid increases in allowed charges for physicians care Table 8 shows that from 1971 to 1977 the deductible expense for physicians services under Medicare decreased from about 19 percent to 12 percent of all allowed charges

TABLE 8 Physicians Services Percentage Distribution of Reimbursements Coinsurance and Deductibles

Selected Calendar Years 1971-1977

1977

Percent

Allowed Charges 1000

Reimbursement 707Coinsurance 177Deductible 116Source Unpublished HCFA data

Medicaid

Medicaid pays a significant part of hospital and physician care costs for persons under age 19 In 1977 about a fourth of all hospital spending and about one dollar of every eight spent for physician care for this group was financed by Medicaid (Table 9) Medicaid paid 39 percent of nursing home costs for persons aged 65 and over in 1978 It appears that the proportion of nursing home care costs paid by Medicaid and Medicare has been decreasing in recent years

In 1978 the program spent $86 billion for persons aged 19 to 64 which represented 47 percent of total Medicaid expenditures Two groups of Medicaid recishypients in this mid-age range accounted for most of these expenditures disabled persons under age 65 who comprised about one-ninth of all Medicaid recishypients but for whom about one-fifth of all Medicaid expenditures were made and adults in families with dependent children who comprised about one-fifth of all Medicaid recipients and for whom about one-sixth of all Medicaid expenditures were made

197(5 1972 1971

Percent Percent Percent

1000 1000 1000

688 175 127

655 164 181

650 162 188

THE INTERACTION OF PRIVATE AND PUBLIC CHANNELS

Direct or out-of-pocket payments and private inshysurance financed most health care costs for younger age groups while public monies dominated funding for aged persons Major channels of payment for all age groups in 1977 are shown in Table 9 by selected types of medical care

Hospitals were the major recipients of public and private funding for health care receiving 34 percent of private funds and 63 percent of public funds The changing structure of source of payment for hospital care is an important determinant of public and private health care funding policy Although no comprehenshysive survey of sources of payment for hospital care by age group is available data from various public and private sources may be merged to estimate the flow of funds by age group in the hospital industry Table 10 represents this flow of funds for the years 1970 and 1977 Medicare provided an increasing share of

HEALTH CARE FINANCING REVIEWSPRING 1980 76

FIGURE 6 Per Capita Personal Health Care Expenditures for the Aged

by Source of Funds and by Type of Care Calendar Year 1978

$2026

Private $746

Other Public $115|

Programs

Medicaid $271

$869

$109 $792

Medicaid $81

-$31

$490

Medicare $893

$366

$648 $149 $30

Medicare $3

-$11 $230

$2031

bull$42

Total Hospital Physicians All Other Care Services

HEALTH CARE FINANCING REVIEW SPRING 1980 7 7

TABLE 9

Percentage Distribution of Health Care Expenditures by Channels of Payment for Hospital Care Physicians Services and All Other Health Care Services Calendar Year 1977

Private Public

Private Direct Health

Age Group Total Total Payments Insurance Other Total Medicare Medicaid Other

All Personal Health Care All Ages 1000 610 318 279 13 390 146 112 132 Under 19 1000 715 381 327 7 285 1 156 128 19-64 1000 712 319 374 19 288 30 89 169 65 and Over 1000 361 291 66 4 639 442 138 59

Hospital Care All Ages 1000 456 83 362 11 544 239 95 210 Under 19 1000 546 37 507 2 454 mdash 250 204 19-64 1000 592 107 469 16 408 49 96 263 65 and Over 1000 120 46 71 3 880 747 39 94

Physician Care All Ages 1000 741 339 401 1 259 147 60 52 Under 19 1000 844 387 457 mdash 156 4 121 31 19-64 1000 845 357 486 1 155 24 56 75 65 and Over 1000 418 262 155 mdash 582 542 31 9

All Other Care All Ages 1000 739 625 90 24 261 19 167 75 Under 19 1000 785 702 69 15 215 - 92 123 19-64 1000 812 634 140 38 188 2 102 84 65 and Over 1000 606 580 19 7 394 53 299 42

community and related hospital spending and private insurance declined due to the extension of Medicare coverage to certain disabled persons under age 65

The proportion of hospital spending for the aged paid by Medicare decreased slightly over the period According to Medicare actuaries more than a million persons aged 65 and over are ineligible for hospital inshysurance under Medicare These persons are predominantly retired government employees whose private insurance continues at retirement and covers most of their physician and hospital care

DIRECT PAYMENTS BY PERSONS AGED 65 AND OVER

Out-of-pocket payments for health care continue to be a major expense for aged persons In 1977 pershysons aged 65 and over paid 29 percent of their health care costs out-of-pocket The amounts paid out-ofshypocket vary considerably by the type of care provided

The out-of-pocket liability of the elderly for hospital care has changed dramatically since 1965mdashthe year before Medicare and Medicaid began About 13 pershycent of spending for hospital care was paid out-ofshypocket in 1965 compared to less than five percent by 1977

The elderly make out-of-pocket payments for physishycians care for that part of the deductible and coinshysurance not paid by Medicaid or private insurance for physicians charges not allowed by Medicare but colshylectable from beneficiaries and for medical services not covered by Medicare Physicians billings to pashytients for charges denied by Medicare because the charges exceed the allowed amounts add a signifishycant amount to patients liabilities generally not covered by private insurance Through 1976 the percentage of total physicians charges paid by Medicare declined because of the growing obligations of Medicare beneficiaries for physicians charges on unassigned claims that were submitted by physishycians but disallowed These disallowed charges to beneficiaries increased from two percent of the total physician bill for the aged in fiscal year 1968 to about 10 percent in calendar year 1976 where they remained through 1978 In dollar terms these out-of-pocket exshypenses for physicians services were about $84 per capita in 1977 and preliminary estimates indicate that the costs will rise to about $96 per capita in 1978

Payment for nursing home care represents the largest health care liability for persons aged 65 and overmdashestimated at $271 per capita in 1978 up from $228 in 1977 and $109 in 1970 About 52 percent of nursing home care was financed out-of-pocket by beneficiaries in 1978

HEALTH CARE FINANCING REVIEW SPRING 1980 78

TABLE 10

Hospital Expenditures and Percentage Distribution of Channels of Payment by Type of Hospital and Age Group Calendar Years 1970 and 1977 (Dollar amounts In millions)

1977 1970

65 and 65 and Total Under 19 19-64 Over Total Under 19 19-64 Over

Psychiatric Hospitals (non-Federal) $4015 $199 $2632 $1184 $2534 $81 $1710 $744 State and Local Hospitals

Sources of Payment-Total 1000 100-0 1000 1000 1000 1000 1000 1000 Medicare 17 mdash 4 49 5 mdash mdash 16 Medicaid 187 347 153 236 110 37 5 359 Other Federal 15 70 15 5 15 99 15 5 Other State and Local 446 85 465 465 701 741 791 489 Private Health Insurance 140 412 180 6 10 37 12 1 Direct Payment 195 85 183 239 159 86 176 129

Private Hospitals $661 $33 $433 $195 $258 $8 $174 $76

Sources of Payment-Total 1000 1000 1000 1000 1000 1000_ 1000 1000 Medicare 17 - 5 46 35 mdash mdash 118 Other State and Local 11 30 12 5 19 mdash 29 mdash Private Health Insurance 700 848 774 508 481 375 483 487 Philanthropy 39 30 39 41 39 125 34 39 Direct Payments 234 91 171 400 426 500 454 355

Federal Hospitals $6099 $747 $4595 $757 $2822 $499 $2025 $349

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Veterans Administration 586 - 636 856 533 mdash 599 828 Department of Defense 322 631 312 83 380 835 328 92 Other 92 369 52 61 88 165 73 80

Other Hospitals $57139 $5572 $34806 $16761 $22184 $2901 $13397 $5885

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Medicare 282 1 60 838 223 mdash - 842 Medicaid 99 281 105 27 88 169 99 23 Workers Compensation 23 mdash 37 2 23 mdash 38 3 State and Local Public Assistance 7 3 11 2 9 11 11 2 Other State and Local 59 13 86 19 70 95 87 19 Department of Defense 7 18 9 1 11 30 11 1 Other Government Programs 15 66 10 6 9 23 10 1 Philanthropy 12 3 19 2 15 5 19 10 Private Health Insurance 412 576 548 76 444 588 585 54 Direct Payments 83 40 115 28 107 80 140 44

Payments for drugs and drug sundries and for denshytists services are another major expense Precise dollar amounts for these payments are not currently available although surveys now under way will proshyvide estimates of out-of-pocket expenses for these types of care as well as for other health services Out-of-pocket spending for drugs and dentists sershyvices is estimated at $150 per capita in 1977 and $160 in 1978

Medicare Supplementary Medical Insurance (SMI) and private health insurance premiums are also paid out-of-pocket at a rate of $78 per capita for SMI and $90 per capita for private health insurance Persons aged 65 and over paid an average of about $698 for health related services and items out-of-pocket in 1977mdashrepresenting 12 percent of their $5900 average income

Conclusions Spending for health care varies significantly by age

group Per capita health spending increases steadily with age for most health care sectors

Young persons are spending a decreasing share of the health dollar because they are declining as a pershycent of the total population Private sources of payshyment provide most of the health expenses for the young

The middle age group spends most of the health care dollar because it is the largest age group Most health expenses for this group are paid by private sources

Persons aged 65 and over continue to increase steadily as a percent of the total population The health care needs of these persons shown by current use of various sectors of health care are expected to

HEALTH CARE FINANCING REVIEW SPRING 1980 79

grow along with their numbers resulting in an inshycreasing share of personal health care spending for and by the elderly Public financing has been and conshytinues to be the major source of funding for personal health care costs for the aged As the aged populashytion continues to grow in the future the need for public financing of health care costs is expected to increase especially for those types of care which aged persons use more oftenmdashhospital care physishycians services and nursing home care The populashytion within the age group 65 and over is aging and is expected to add to the need for health care services especially nursing home care Health care policy and financing must continue to cope with these trends which are expected to continue for many years to come

AcknowledgmentsThe author is indebted to Mary E Rieder Acting Director

of the Division of National Cost Estimates to members of the Division of National Cost Estimates and Intern Karen Young for their comments and suggestions and to Joanie Henderson and Ann Leake for secretarial assistance

Technical Note A

CONCEPTS AND DEFINITIONS

All estimates in this report relate to personal health care expendituresmdashthat portion of the total national health care expense representing health services and supplies received directly by individuals They make up total national expenditures for health together with spending for research and medical facilities conshystruction identifiable administrative costs of governshyment programs government public health activities expenses incurred by philanthropic organizations in raising funds for health care and the net costs of private health insurance (the difference between premiums and benefit payments)

All expenditures for health care that are channeled through any program established by public law are treated as public expenditures in these estimates Exshypenditures under workers compensation programs for example are included with government expenshyditures although they involve benefits paid by private insurers from premiums collected from private sources

Funds disbursed by public programs are reported as program expenditures even for example when they include significant private contributions made by beneficiaries as in the Supplementary Medical Inshysurance (SMI) program The benefit expenditures reported in this series are not adjusted to eliminate the duplication that exists when payments are made by State governments into the Medicare trust fund in the form of SMI premiums for public assistance and Supplemental Security Income (SSI) recipients and they are reported as Medicaid expenditures The amount paid by Medicaid as premiums in 1978 was $288 million for all beneficiaries that portion not reshytained in the trust fund is duplicated as a Medicare expense The amount does not noticeably affect the relationships that are reported

Health expenditures by State and local governshyments that involve funds received from the Federal government under revenue sharing are reported as State and local expenditures not as Federal expenshyditures These funds amounted to $232 million in the first half of fiscal year 1976 the latest period for which data are available No information is available on the use of such funds by specific programs

Responsibility for compiling estimates of national health care spending now resides with the Health Care Financing Administration (HCFA) Department of Health and Human Services Definitions of the various types of health care and descriptions of the public programs are contained in the various articles in the series carrying estimates for expenditures (Gibson 1979 Carroll 1979)

It should be noted that hospital care includes all exshypenditures for care in hospitalsmdashboth inpatient and outpatient The data cover all services and supplies provided

Population estimates used here are selected to corshyrespond to the population covered by expenditure estimates Since national health expenditures cover all spending for or by United States citizens and residents population estimates include the institushytionalized population the Armed Forces (both in the United States and overseas) Federal civilian employees overseas and the civilian population of outlying areas

The group under age 19 presents some problems in connection with the available demographic informashytion on utilization and expenditures Extensive intershypolation is often required to estimate certain types of expenditures for this group Because of the nature of some data sources expenses for certain persons under age 19 who are part of the labor force are not separable from those aged 19 to 64 and expenses of dependent children over age 18 are included with those of the younger group

Technical Note B

The Health Interview Survey (HIS) which provided the data for Table 2 continuously samples members of households It was not intended to obtain complete information on the deceased nor on the six percent of the aged population who are institutionalized Thus Table 2 tends to underestimate the volume of services used by the aged The degree of this underestimation can be evaluated by comparing the statistics in Table 2 to other data A 1973 study (the latest available) determined that six percent of the aged population is institutionalized in psychiatric and long-stay hospitals or nursing homes Institutionalized persons had more frequent admissions and a longer average length of stay than did the noninstitutionalized elderly [Deacon 1977] This study also determined that the institushytionalized elderly used 25 times more physician sershyvices and twice as many drug prescriptions per capita than did their noninstitutionalized counterparts Thus Table 2 significantly underestimates hospital use by the elderly

HEALTH CARE FINANCING REVIEWSPRING 1980 80

It is also necessary to evaluate peoples health exshypenditures in the year of their death to assess the underestimate of the values in Table 2 The Health Inshyterview Survey captures only about half of the health care use of persons dying in the survey year The following table presents the disproportionate share of Medicare dollars spent for aged persons who died in 1976

Technical Note C

Table A Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Years 197819771976 19701965

Table B Estimated Personal Health Care Expenshyditures under Public Programs by Type of Expenditure and Source of Funds for Three Age Groups for Calendar Years 19781977 1976 1970 1965

Table C Expenditures for Health Services and Supshyplies under Public Programs by Program for Three Age Groups for Calendar Years 1978 19771976 1970 1965

Table D Estimated Amount and Percentage Distribution of Personal Health Care Exshypenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 197819771976 1970 1965

Distribution of Medicare Expenditures for Persons Who Died in 1976

Percent of Medicare Percent of Total Recipients Who Died Medicare Dollars

Age Group in 1976 Spent for Those Recipients

All ages 65 and Over 79 207

65-69 40 15370-74 58 18575-79 80 20380-84 118 24985 and Over 198 321

Source Unpublished HCFA data

TABLE A

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1978

All Ages Under 19 19-64 65 and Over

Type of Expenditure Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate amount (in millions)

Total $167911 $102870 $65042 $19875 $14180 $5696 $98668 $70497 $28172 $49366 $18192 $31175

Hospital Care 76025 35107 40919 7070 3835 3235 47785 28626 19159 21169 2645 18524 PhysiciansServices 35250 25811 9439 5215 4382 833 21124 17808 3316 8910 3620 5290 Dentists Services 13300 12761 539 2780 2546 234 9137 8876 261 1383 1338 45 Other Professional Services 4275 3303 972 398 193 205 2787 2480 307 1090 631 459 Drugs and Drug Sundries 15098 13798 1300 2823 2650 173 9044 8419 625 3231 2728 503 Eyeglasses and Appliances 3879 3522 357 481 459 22 2793 2659 134 605 405 201 Nursing-Home Care 15751 7394 8358 68 1 67 3057 600 2457 12624 6790 5834 Other Health Services 4333 1175 3158 1040 113 927 2941 1028 1913 354 35 319

Per Capita Amount Total $75298 $46131 $29167 $28607 $20410 $8199 $76396 $54584 $21813 $202619 $74668 $127955

Hospital Care 34093 15743 18350 10176 5520 4656 36998 22164 14834 86886 10856 76030 PhysiciansServices 15808 11575 4233 7506 6307 1199 16356 13788 2567 36570 14858 21712 DentistsServices 5964 5723 242 4001 3665 337 7075 6872 202 5676 5492 185 Other Professional Services 1917 1481 436 573 278 295 2158 1920 238 4474 2590 1884 Drugs and Drug Sundries 6770 6187 583 4063 3814 249 7002 6519 484 13261 11197 2064 Eyeglasses and Appliances 1740 1579 160 692 661 32 2162 2059 104 2483 1662 825 Nursing-Home Care 7064 3316 3748 100 01 96 2367 465 1902 51814 27869 23945 Other Health Services 1943 527 1416 1497 163 1334 2277 796 1481 1453 144 1310

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 453 341 629 356 270 568 484 406 680 429 145 594 PhysiciansServices 210 251 145 262 309 146 214 253 118 180 199 170 Dentists Services 79 124 8 140 180 41 93 126 9 28 74 1 Other Professional Services 25 32 15 20 14 36 28 35 11 22 35 15 Drugs and Drug Sundries 90 134 20 142 187 30 92 119 22 65 150 16 Eyeglasses and Appliances 23 34 5 24 32 4 28 38 5 12 22 6 Nursing-Home Care 94 72 129 3 mdash 12 31 9 87 256 373 187 Other Health Services 26 11 49 52 8 163 30 15 68 7 2 10

8 1 HEALTH CARE FINANCING REVIEW SPRING 1980

TABLE 2

Percent of Persons Hospitalized Days per Patient Physician and Dental Visits per Capita Noninstitutionalized Persons by Age Group 1978

Percent of PersonsHospitalized

Short-Stay Hospital Days per Patient

Physician Visits

per Capita Dental Visits

per Capita

Age Group Total Men Women Total Men Women

All Persons 104 85 122 97 110 88 48 16 Under 17 53 56 50 64 64 65 41 16 17-2425-44

106 113

62 69

148 154

58 73

72 89

52 66

43 47

15 17

45-6465 and Over

121 180

118 192

124 172

123 156

129 172

119 144

53 63

17 12

Source Current Estimates from the Health Interview Survey

other age groups This survey also showed that more older persons tend to have visits in which drugs are prescribed injections given and blood pressure checked The relative number of surgical operations by age group is another measure of the variations in the complexity or intensity of physicians services In 1977 the Hospital Discharge Survey showed that the number of surgical operations in hospitals was greater for older persons There were 41 per 1000 pershysons under age 15 and 166 operations per 1000 pershysons aged 65 and over [NCHS 1979] Thus the intenshysity of a physician visit as well as the number of visits and the per capita expenditure for physician services are greater for older persons

Prescription Drugs and Drug Sundries

Along with short-stay hospital and physician care prescription drug usage varies with age These drug expenditures represent nine percent of personal health care expenditures for the total population They constitute 14 percent of the expenditures for persons under age 19 9 percent for persons 19-64 and seven percent for persons 65 and over In 1978 per capita spending for prescription drugs ranged from $41 for those under age 19 to $133 for the aged Similarly the number of prescriptions per capita and the intensity of a prescription (measured by average price) also inshycreased with age The following table shows spending for drugs by age group It is based on a 1973 NCHS survey adjusted to include institutionalized and deceased persons

TABLE 3 Prescriptions per Capita and Average Price

per Prescription 1973

Age Group Prescriptions Average Price per Capita per Prescription

0-16 32 $33917-24 42 37725-44 56 43345-64 87 50965 and over 144 509

Source (Trapnell 1979)

HEALTH CARE FINANCING REVIEW SPRING 1980

Dental Care

Unlike other categories of care spending for dental care does not increase directly with age The number of dental visits per person by age group remains relatively constant for persons under age 65 and decreases for older persons

According to the Health Interview Survey only 40 percent of the aged population reported visiting a denshytist in 1977 compared to over 60 percent of the other age groups Dental care expenditures accounted for 9 percent of total health care costs for persons aged 19 to 64 but for only three percent of total spending for the aged group However it should be noted that the intensity of dental services measured by the average charge per dental visit is greater for older persons Thus although the aged make fewer dental visits than do others their visits are more costly

Nursing Home Care

Nursing home use is dominated by the aged or near-aged The National Nursing Home Survey (NNHS) shows that persons 65 and over comprised 86 percent of the nursing home population in 1977 Persons in the 55 to 64 age group accounted for an additional eight percent of nursing home residents As expected in 1978 nursing home care was second to hospital care as the most expensive health item for persons aged 65 and over The per capita expenditure was $518mdashone-fourth of the total health care spending for that age group

Causes of Increased Health Care Spending with Age

Except for dental care the number of contacts with health care providers increases with age Much of this increase is due to degeneration associated with aging shown in chronic diseases and physical impairshyment requiring frequent health care services One measure of degeneration is a persons subjective assessment of the degree to which a chronic condishytion is limiting his or her activity

67

The percentage of persons reporting limitation of activity (in the Health Interview Survey for 1974) acshycelerates with age and accelerates faster for men than for women (Figure 1) As people age an increasshying proportion suffers from some chronic condition reshyquiring medical attention

The 14 percent of the population who suffered a chronic condition accounted for 37 percent of all short-stay hospital discharges for 55 percent of all short-stay hospital days and for 28 percent of all out-of-hospital physician visits Chronically impaired pershysons account for an increasing share of hospital discharges as age increases (Figure 2)

For males each percentage point increase in the proportion of an age group suffering a chronic condishytion (Figure 1) is associated with an increase of 45 hospital discharges per 10000 persons For females a percentage point increase in the same proportion is associated with an increase of 38 hospital discharges per 10000 persons In the group aged 65 and over people with chronic conditions account for most of the hospitalization

The acceleration of the incidence of chronic condishytions shown in Figure 2 and of the implied use of health services related to these conditions is understated because two groups who use many health services are excluded institutionalized pershysonsmdashwho are limited in activity by definitionmdashand people who died before the survey

Increasing use of health care services associated with increases in chronic conditions are rooted in age-related degeneration of biological functions Accorshyding to one study each year of life after age 30 is acshycompanied by slightly less than one percent degeneration in a composite of ones functional capacity (Strehler 1977) This steady rate sets the stage for increasing death disease and impairment which are directly associated with health care use rates

TRENDS IN HEALTH CARE SPENDING Demographic Shifts

Personal health care spending for older people is rising as a percentage of the total and that for young people is falling as shown in Table 4

This trend results in part from the decrease in the proportion of the population under age 19mdasha decrease which began around 1965 Thirty-eight percent of the

population was under age 19 in 1965 the percentage dropped to 31 percent by 1978

This aging of the population tends to increase the intensity and therefore the costs of health care As shown previously health care for the young is generally less intense than for older age groups Therefore as the percent of total contacts with health care providers by the young diminishes due to their declining relative and absolute numbers the average intensity of service for the total population increases

Changes in fertility rates have affected hospitalizashytion rates for the child-bearing age group Hospital days of care for deliveries dropped 37 percent beshytween 1967 and 1977 from 410 days per 1000 females aged 15 to 44 in 1967 to 259 days in 1977 Decreasing birth rates also imply fewer physician visits and less prescription drug spending for this group (NCHS 19671977) This has a dual effect on health care use it reduces the number of persons needing health care and the number of women needing obstetrical care

Aging of the Aged

Within the group aged 65 and over the proportion of the very old is increasing Persons aged 85 and over comprised about 59 percent of the total populashytion of the nation in 1965 and 87 percent in 1978mdasha trend which may continue for some years

The impact of this trend on health care costs is significant In 1976 under Medicare persons aged 85 and over used 5484 days of short-stay hospital care per 1000 persons compared to 3684 days for all pershysons 65 and overmdasha 50 percent higher rate (unshypublished HCFA data) The rate for persons under age 65 was 894 days per 1000 persons Further persons aged 85 and above accounted for 35 percent of all nursing home days of care in 1977 [NNHS 1977] while comprising only eight percent of the population aged 65 and over

IMPACT OF PUBLIC POLICY

The implementation of the Medicare and Medicaid programs and the Economic Stabilization Program [ESP] appear to explain changes in health care use and costs by age groups which are not associated with age-related biological factors

TABLE 4

Percentage Distribution of Personal Health Care Expenditures by Age Group Selected Calendar Years 1965-78

Age Group 1965 1970 1976 1977 1978

All Ages 1000 1000 1000 1000 1000

0-18 171 158 126 122 118 19-64 591 580 589 587 588 65 and Over 238 263 285 290 294

HEALTH CARE FINANCING REVIEW SPRING 1980 68

FIGURE 1 Percentage of Persons with Chronic Conditions by Age and Sex 1974

Per

cent

aae

497 5 0 shy

431

40 shy

30 shy

253

230

2 0 shy

1 0 - 92 86

40 33

0 shy

Under 17 17-44 45-64 65 and Over

AgeSex Group

Female

Male

HEALTH CARE FINANCING REVIEW SPRING 1980 6 9

FIGURE 2 Hospital Discharge Rate by Age and Sex Total and Those Attributable to Persons

with Chronic Conditions 1974 D

isch

arg

e

Rat

e pe

r 1

000

Popula

tion

300shy

281

240shy 235

211 204

180shy181

169 163

120shy106

93

60 shy66

75 80

39 29

7 8

0 -Female Male

Under 17

Female Male

17-44

Female | Male

45-64

Female] Male

65 and Over

AgeSex Group

Chronic Conditions

Total Conditions

7 0 HEALTH CARE FINANCING REVIEW SPRING 1980

Medicare

With the implementation of Medicare in 1966 short-stay hospital admission rates for persons aged 65 andover increased rapidly To isolate age-related biological factors from other factors in the use of medical services Figure 3 was developed The figure displays the proportion of the aged population which had at least some hospital expense paid by Medicare for the years 196719681969 and 1976 The effect of biological age-related factors underlying hospitalizashytion rates is approximated by the slopes of the lines which show an increase of about 31 percent for each year after age 66 Although the rate of use by all pershysons (Figure 3) did not change over the early period hospitalization rates for all aged persons under Medicare did increase The vertical distances betweenthe lines in Figure 3 represent changes in overall hospitalization rates and reflect factors other than age-related biological ones

Figure 4 indicates that the Medicare program made hospital care affordable to the elderly and that the resulting influx of the aged into hospitals temporarily displaced younger patients Following that initial surge Medicare admission rates stablilized at about 300 per 1000 beneficiaries from fiscal year 1969 through fiscal year 1971 after which admission rates increased at a rate of two percentage points per year Admission rates for persons under age 65 increased sharply in 1970 and again between 1972 and 1974 before stabilizing

Hospital stays involving some surgery for persons aged 65 and over also increased but at a different rate In the early period from 1965 to 1972 hospital discharges with surgery per 1000 Medicare beneficiaries increased at an annual rate of 18 pershycent From 1972 to 1976 this surgical rate increased 29 percent annually

Upward trends in hospitalization and surgical rates for the aged are also associated with a shift in physishycians Medicare charges for services performed outshyside the hospital to services performed in the hospital as shown in Table 5

Evidently this shift in physicians charges from out-of-hospital to in-hospital care is related to increasing hospitalization rates and surgical rates Physicians charges are generally higher for hospital visits than for out-of-hospital visits and average physicians surgical charges generally far exceed average chargesfor other types of service Both out-of-hospital visits to physicians and the number of hospital days used per capita by aged persons remained relatively stable during the period 1971 through 1977 Total physician

visits did not change significantly but inpatient visits and surgical services as a proportion of total visits inshycreased leading to a shift in physicians charges toward more expensive types of care

Medicaid Changes in the Medicaid program may also help exshy

plain the variation in admission rates shown in Figure 4 The Medicaid program formally begun in January 1966 is a joint State-Federal program in which States participate at their option Ail but two States joined the program between 1965 and 1970 Alaska joined in fiscal year 1973 Arizona is the only State without a Medicaid program The last major influx of Medicaid participants occurred in January 1970 when seven States joined the program

The number of persons under age 65 eligible for Medicaid due to disability increased significantly betshyween 1969 and 1970 These persons are extensive users of hospital care and their enrollment in Medicaid partially explains the increase in admission rates for persons under age 65 in 1970mdasha year in which admission rates for aged persons did not change

The Economic Stabilization Program

The resumption of increases in hospital admission rates for aged persons increasing surgical hospitalizations a shift of physicians charges toward care in the hospital and an increase in admission rates for persons under age 65 coincided with the start of the Economic Stabilization Program (ESP) in fiscal year 1972 For most of its effective life the ESP restricted increases in hospital costs per admission and physicians charges per procedure but did not restrict increases in hospital admissions or in total physicians services Since the ESP had no effective limitation on the volume of services one interpretashytion of the data is that hospitals and physicians responded to the ESP requirements by allowing hospital admission rates to increase

After the ESP ended in early 1974 overall admission rates seemed to stabilize although admission rates for aged persons continued to increase

Changes in the rate of surgical operations per capita paralleled changes in admission rates over the period 1967-1978 Surgical rates per capita increased at an annual rate of 18 percent from the year ending in June 1967 to 1971 they increased at an annual rate of 32 percent from 1971 through 1974 and have decelerated to an annual rate of increase of 21 pershycent since 1974 [AHA Panel Survey]

TABLE 5 Physicians Services Charges Under Medicare for Persons Aged 65 and Over for Selected Calendar

Years 1971-1977 (amounts in billions)1

1971 1972 1976 1977

Amount Percent Amount Percent Amount Percent Amount Percent

Allowed ChargesInpatient Hospital

Out-of-Hospital1

$28 16

12

1000 568

432

$30 17

13

1000 576

424

$50 30

20

1000 600

400

$59 36

23

1000 607

393

1 Excludes outpatient hospital billing for physicians services Source Current Medicare Surveys

HEALTH CARE FINANCING REVIEW SPRING 1980 71

FIGURE 3 Persons Hospitalized per 1000 Medicare Beneficiaries by Age

Calendar Years 19671968 1969 and 1976 P

erso

ns H

osp

italiz

ed

per

10

00 B

enefic

iaries

300

250

1976

1969

bull 1968

bull 1967

200

150

100 66 68 70 72 74 76

Age

78 80 82 84

7 2 HEALTH CARE FINANCING REVIEW SPRING 1980

FIGURE 4 Short-Stay Hospital Admission Rates for Selected Populations

Years Ending June 1967-78

350

Adm

issi

ons

per

100

0 P

opul

atio

n

330shy

310

290

250shy

170shy

150shy

130shy

110shy

Total Population

Persons Under Age 65

Medicare Admissions Age 65 and Over

1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978

HEALTH CARE FINANCING REVIEW SPRING 1980 7 3

The Cost of Living Council in its evaluation of the early part of the ESP program reported that controls on hospital charges shifted the burden of increasing hospital expenses toward cost reimbursement proshygrams such as Medicare and Medicaid and away fromcharge reimbursement payment mechanisms such as private insurance Because Medicare and Medicaid serve mainly the aged and children while charge reimshybursement serves many of the 19 to 64 age group the early ESP regulations tended to shift increasing hospital costs to the aged and those 18 and under This affected the age distribution of hospital care exshypenses

Channels of Payment

PUBLIC CHANNELS

Public funding of health care for all age groups has been shifting from State and local governments to the Federal government In 1965 the main sources of public financing of health care were State and local governments which provided over half of the $79 billion in public money spent for health care Most of these non-Federal public funds were spent for the mid-age group which comprised the largest proportion of persons in non-Federal government psychiatric hospitals By 1970 the State and local share of public health care spending had declined to 35 percent and

by 1978 the share was down to 29 percent The decline in the percentage of health care spending by State and local governments may be traced to two factors the growth of Federal programs which parshytially replaced State and local public assistance spending for medical care and the decrease in populashytions of State and local governmental psychiatric hospitals The Federal share of total public health care spending grew from 48 percent in 1965 to 71 pershycent in 1978 Between 1965 and 1978 inclusively the Federal share grew from 51 percent to 86 percent for the aged from 43 percent to 57 percent for the midshyage group and from 61 percent to 66 percent for pershysons under age 19 The distribution of total personal health spending in 1978 by age group and source of public payment is displayed in Figure 5

In 1965 the Veterans Administration the Departshyment of Defense and workers compensation also proshyvided health caremdashmainly for the mid-age group These programs spent $275 billion and accounted for 35 percent of all public spending in 1965 In 1978 they spent $116 billion but their share of public spending diminished to 17 percent reflecting the rapid growth in Medicare and Medicaid spending Public financing as a percent of all health care funding grew rapidly after the introduction of Medicare and Medicaid in 1966 but more recently appears to have stabilized for all age groups (Table 6) Although public funding of personal health care expenditures continues to grow State and local funding as a percent of total expenshyditures had declined

TABLE 6

Percentage Distribution of Funding for Personal Health Care for Selected Calendar Years 1965 to 1978

Age Group 1978 1977 1970 1970 1965

All Ages Total 1000 1000 1000 1000 1000

Private 613 610 609 659 789 Public 387 390 391 341 211

Federal 277 276 275 222 101 State and Local 110 114 116 120 110

Under age 19 Total 1000 1000 1000 1000 1000

Private 713 715 711 761 845 Public 287 285 285 239 155

Federal 189 187 193 142 94 State and Local 98 98 97 97 61

Ages 19-64 Total 1000 1000 1000 1000 1000

Private 714 712 711 754 808 Public 286 288 289 246 192

Federal 162 160 160 111 83 State and Local 124 128 128 135 110

Ages 65 and Over Total 1000 1000 1000 1000 1000

Private 368 361 355 388 701 Public 632 639 645 612 299

Federal 542 547 547 513 154 State and Local 89 92 98 99 144

HEALTH CARE FINANCING REVIEW SPRING 1980 74

FIGURE 5 Percentage Distribution of Personal Health Care Expenditures by Source of Funds and Age Group

Calendar Year 1978

$986 billion

72

$494 billion

37

9

$199 billion 12

54 71

16 10 19

Under 19 19-64 65 and over

Age Group

Private

State and Local Government

Federal Government

HEALTH CARE FINANCING REVIEW SPRING 1980 7 5

Medicare and Medicaid

Two-thirds of all public financing of health care is provided by Medicare and Medicaid Although Medicare finances health care primarily for aged pershysons Medicaid finances health care for all ages as shown by Table 7

TABLE 7 Percent of Total Personal Health Care

Expenditures Financed by Public Programs 1978

Age Group Medicare Medicaid Other

All ages 148 109 130 Under 19 2 158 127 19-64 32 87 167 65 and Over 441 134 57

Medicare In 1978 Medicare provided 44 percent of all health

care costs for the aged compared to 39 percent in 1970 Part of this increase can be attributed to the risshying proportion of hospital care funded by Medicare Medicare paid 71 percent of hospital care costs in 1970 and 75 percent in 1978 This increase was not due to explicit policy decisions It resulted from changes in the mix of psychiatric and non-psychiatric hospital care Between 1955 and 1978 the average daily census in psychiatric hospitals fell from 677000 patients to 190000 patients the age distribution of the average daily census remained fairly constant Consequently community hospital days grew as a share of total hospital days for the aged This increasshying proportion of more highly reimbursed care has caused the increase in the Medicare share of total hospital care for the aged

The proportion of physician expenses paid by Medicare also has increased This occurred because the Medicare annual deductible increased from $50 to $60 in 1973 but has not changed since despite rapid increases in allowed charges for physicians care Table 8 shows that from 1971 to 1977 the deductible expense for physicians services under Medicare decreased from about 19 percent to 12 percent of all allowed charges

TABLE 8 Physicians Services Percentage Distribution of Reimbursements Coinsurance and Deductibles

Selected Calendar Years 1971-1977

1977

Percent

Allowed Charges 1000

Reimbursement 707Coinsurance 177Deductible 116Source Unpublished HCFA data

Medicaid

Medicaid pays a significant part of hospital and physician care costs for persons under age 19 In 1977 about a fourth of all hospital spending and about one dollar of every eight spent for physician care for this group was financed by Medicaid (Table 9) Medicaid paid 39 percent of nursing home costs for persons aged 65 and over in 1978 It appears that the proportion of nursing home care costs paid by Medicaid and Medicare has been decreasing in recent years

In 1978 the program spent $86 billion for persons aged 19 to 64 which represented 47 percent of total Medicaid expenditures Two groups of Medicaid recishypients in this mid-age range accounted for most of these expenditures disabled persons under age 65 who comprised about one-ninth of all Medicaid recishypients but for whom about one-fifth of all Medicaid expenditures were made and adults in families with dependent children who comprised about one-fifth of all Medicaid recipients and for whom about one-sixth of all Medicaid expenditures were made

197(5 1972 1971

Percent Percent Percent

1000 1000 1000

688 175 127

655 164 181

650 162 188

THE INTERACTION OF PRIVATE AND PUBLIC CHANNELS

Direct or out-of-pocket payments and private inshysurance financed most health care costs for younger age groups while public monies dominated funding for aged persons Major channels of payment for all age groups in 1977 are shown in Table 9 by selected types of medical care

Hospitals were the major recipients of public and private funding for health care receiving 34 percent of private funds and 63 percent of public funds The changing structure of source of payment for hospital care is an important determinant of public and private health care funding policy Although no comprehenshysive survey of sources of payment for hospital care by age group is available data from various public and private sources may be merged to estimate the flow of funds by age group in the hospital industry Table 10 represents this flow of funds for the years 1970 and 1977 Medicare provided an increasing share of

HEALTH CARE FINANCING REVIEWSPRING 1980 76

FIGURE 6 Per Capita Personal Health Care Expenditures for the Aged

by Source of Funds and by Type of Care Calendar Year 1978

$2026

Private $746

Other Public $115|

Programs

Medicaid $271

$869

$109 $792

Medicaid $81

-$31

$490

Medicare $893

$366

$648 $149 $30

Medicare $3

-$11 $230

$2031

bull$42

Total Hospital Physicians All Other Care Services

HEALTH CARE FINANCING REVIEW SPRING 1980 7 7

TABLE 9

Percentage Distribution of Health Care Expenditures by Channels of Payment for Hospital Care Physicians Services and All Other Health Care Services Calendar Year 1977

Private Public

Private Direct Health

Age Group Total Total Payments Insurance Other Total Medicare Medicaid Other

All Personal Health Care All Ages 1000 610 318 279 13 390 146 112 132 Under 19 1000 715 381 327 7 285 1 156 128 19-64 1000 712 319 374 19 288 30 89 169 65 and Over 1000 361 291 66 4 639 442 138 59

Hospital Care All Ages 1000 456 83 362 11 544 239 95 210 Under 19 1000 546 37 507 2 454 mdash 250 204 19-64 1000 592 107 469 16 408 49 96 263 65 and Over 1000 120 46 71 3 880 747 39 94

Physician Care All Ages 1000 741 339 401 1 259 147 60 52 Under 19 1000 844 387 457 mdash 156 4 121 31 19-64 1000 845 357 486 1 155 24 56 75 65 and Over 1000 418 262 155 mdash 582 542 31 9

All Other Care All Ages 1000 739 625 90 24 261 19 167 75 Under 19 1000 785 702 69 15 215 - 92 123 19-64 1000 812 634 140 38 188 2 102 84 65 and Over 1000 606 580 19 7 394 53 299 42

community and related hospital spending and private insurance declined due to the extension of Medicare coverage to certain disabled persons under age 65

The proportion of hospital spending for the aged paid by Medicare decreased slightly over the period According to Medicare actuaries more than a million persons aged 65 and over are ineligible for hospital inshysurance under Medicare These persons are predominantly retired government employees whose private insurance continues at retirement and covers most of their physician and hospital care

DIRECT PAYMENTS BY PERSONS AGED 65 AND OVER

Out-of-pocket payments for health care continue to be a major expense for aged persons In 1977 pershysons aged 65 and over paid 29 percent of their health care costs out-of-pocket The amounts paid out-ofshypocket vary considerably by the type of care provided

The out-of-pocket liability of the elderly for hospital care has changed dramatically since 1965mdashthe year before Medicare and Medicaid began About 13 pershycent of spending for hospital care was paid out-ofshypocket in 1965 compared to less than five percent by 1977

The elderly make out-of-pocket payments for physishycians care for that part of the deductible and coinshysurance not paid by Medicaid or private insurance for physicians charges not allowed by Medicare but colshylectable from beneficiaries and for medical services not covered by Medicare Physicians billings to pashytients for charges denied by Medicare because the charges exceed the allowed amounts add a signifishycant amount to patients liabilities generally not covered by private insurance Through 1976 the percentage of total physicians charges paid by Medicare declined because of the growing obligations of Medicare beneficiaries for physicians charges on unassigned claims that were submitted by physishycians but disallowed These disallowed charges to beneficiaries increased from two percent of the total physician bill for the aged in fiscal year 1968 to about 10 percent in calendar year 1976 where they remained through 1978 In dollar terms these out-of-pocket exshypenses for physicians services were about $84 per capita in 1977 and preliminary estimates indicate that the costs will rise to about $96 per capita in 1978

Payment for nursing home care represents the largest health care liability for persons aged 65 and overmdashestimated at $271 per capita in 1978 up from $228 in 1977 and $109 in 1970 About 52 percent of nursing home care was financed out-of-pocket by beneficiaries in 1978

HEALTH CARE FINANCING REVIEW SPRING 1980 78

TABLE 10

Hospital Expenditures and Percentage Distribution of Channels of Payment by Type of Hospital and Age Group Calendar Years 1970 and 1977 (Dollar amounts In millions)

1977 1970

65 and 65 and Total Under 19 19-64 Over Total Under 19 19-64 Over

Psychiatric Hospitals (non-Federal) $4015 $199 $2632 $1184 $2534 $81 $1710 $744 State and Local Hospitals

Sources of Payment-Total 1000 100-0 1000 1000 1000 1000 1000 1000 Medicare 17 mdash 4 49 5 mdash mdash 16 Medicaid 187 347 153 236 110 37 5 359 Other Federal 15 70 15 5 15 99 15 5 Other State and Local 446 85 465 465 701 741 791 489 Private Health Insurance 140 412 180 6 10 37 12 1 Direct Payment 195 85 183 239 159 86 176 129

Private Hospitals $661 $33 $433 $195 $258 $8 $174 $76

Sources of Payment-Total 1000 1000 1000 1000 1000 1000_ 1000 1000 Medicare 17 - 5 46 35 mdash mdash 118 Other State and Local 11 30 12 5 19 mdash 29 mdash Private Health Insurance 700 848 774 508 481 375 483 487 Philanthropy 39 30 39 41 39 125 34 39 Direct Payments 234 91 171 400 426 500 454 355

Federal Hospitals $6099 $747 $4595 $757 $2822 $499 $2025 $349

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Veterans Administration 586 - 636 856 533 mdash 599 828 Department of Defense 322 631 312 83 380 835 328 92 Other 92 369 52 61 88 165 73 80

Other Hospitals $57139 $5572 $34806 $16761 $22184 $2901 $13397 $5885

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Medicare 282 1 60 838 223 mdash - 842 Medicaid 99 281 105 27 88 169 99 23 Workers Compensation 23 mdash 37 2 23 mdash 38 3 State and Local Public Assistance 7 3 11 2 9 11 11 2 Other State and Local 59 13 86 19 70 95 87 19 Department of Defense 7 18 9 1 11 30 11 1 Other Government Programs 15 66 10 6 9 23 10 1 Philanthropy 12 3 19 2 15 5 19 10 Private Health Insurance 412 576 548 76 444 588 585 54 Direct Payments 83 40 115 28 107 80 140 44

Payments for drugs and drug sundries and for denshytists services are another major expense Precise dollar amounts for these payments are not currently available although surveys now under way will proshyvide estimates of out-of-pocket expenses for these types of care as well as for other health services Out-of-pocket spending for drugs and dentists sershyvices is estimated at $150 per capita in 1977 and $160 in 1978

Medicare Supplementary Medical Insurance (SMI) and private health insurance premiums are also paid out-of-pocket at a rate of $78 per capita for SMI and $90 per capita for private health insurance Persons aged 65 and over paid an average of about $698 for health related services and items out-of-pocket in 1977mdashrepresenting 12 percent of their $5900 average income

Conclusions Spending for health care varies significantly by age

group Per capita health spending increases steadily with age for most health care sectors

Young persons are spending a decreasing share of the health dollar because they are declining as a pershycent of the total population Private sources of payshyment provide most of the health expenses for the young

The middle age group spends most of the health care dollar because it is the largest age group Most health expenses for this group are paid by private sources

Persons aged 65 and over continue to increase steadily as a percent of the total population The health care needs of these persons shown by current use of various sectors of health care are expected to

HEALTH CARE FINANCING REVIEW SPRING 1980 79

grow along with their numbers resulting in an inshycreasing share of personal health care spending for and by the elderly Public financing has been and conshytinues to be the major source of funding for personal health care costs for the aged As the aged populashytion continues to grow in the future the need for public financing of health care costs is expected to increase especially for those types of care which aged persons use more oftenmdashhospital care physishycians services and nursing home care The populashytion within the age group 65 and over is aging and is expected to add to the need for health care services especially nursing home care Health care policy and financing must continue to cope with these trends which are expected to continue for many years to come

AcknowledgmentsThe author is indebted to Mary E Rieder Acting Director

of the Division of National Cost Estimates to members of the Division of National Cost Estimates and Intern Karen Young for their comments and suggestions and to Joanie Henderson and Ann Leake for secretarial assistance

Technical Note A

CONCEPTS AND DEFINITIONS

All estimates in this report relate to personal health care expendituresmdashthat portion of the total national health care expense representing health services and supplies received directly by individuals They make up total national expenditures for health together with spending for research and medical facilities conshystruction identifiable administrative costs of governshyment programs government public health activities expenses incurred by philanthropic organizations in raising funds for health care and the net costs of private health insurance (the difference between premiums and benefit payments)

All expenditures for health care that are channeled through any program established by public law are treated as public expenditures in these estimates Exshypenditures under workers compensation programs for example are included with government expenshyditures although they involve benefits paid by private insurers from premiums collected from private sources

Funds disbursed by public programs are reported as program expenditures even for example when they include significant private contributions made by beneficiaries as in the Supplementary Medical Inshysurance (SMI) program The benefit expenditures reported in this series are not adjusted to eliminate the duplication that exists when payments are made by State governments into the Medicare trust fund in the form of SMI premiums for public assistance and Supplemental Security Income (SSI) recipients and they are reported as Medicaid expenditures The amount paid by Medicaid as premiums in 1978 was $288 million for all beneficiaries that portion not reshytained in the trust fund is duplicated as a Medicare expense The amount does not noticeably affect the relationships that are reported

Health expenditures by State and local governshyments that involve funds received from the Federal government under revenue sharing are reported as State and local expenditures not as Federal expenshyditures These funds amounted to $232 million in the first half of fiscal year 1976 the latest period for which data are available No information is available on the use of such funds by specific programs

Responsibility for compiling estimates of national health care spending now resides with the Health Care Financing Administration (HCFA) Department of Health and Human Services Definitions of the various types of health care and descriptions of the public programs are contained in the various articles in the series carrying estimates for expenditures (Gibson 1979 Carroll 1979)

It should be noted that hospital care includes all exshypenditures for care in hospitalsmdashboth inpatient and outpatient The data cover all services and supplies provided

Population estimates used here are selected to corshyrespond to the population covered by expenditure estimates Since national health expenditures cover all spending for or by United States citizens and residents population estimates include the institushytionalized population the Armed Forces (both in the United States and overseas) Federal civilian employees overseas and the civilian population of outlying areas

The group under age 19 presents some problems in connection with the available demographic informashytion on utilization and expenditures Extensive intershypolation is often required to estimate certain types of expenditures for this group Because of the nature of some data sources expenses for certain persons under age 19 who are part of the labor force are not separable from those aged 19 to 64 and expenses of dependent children over age 18 are included with those of the younger group

Technical Note B

The Health Interview Survey (HIS) which provided the data for Table 2 continuously samples members of households It was not intended to obtain complete information on the deceased nor on the six percent of the aged population who are institutionalized Thus Table 2 tends to underestimate the volume of services used by the aged The degree of this underestimation can be evaluated by comparing the statistics in Table 2 to other data A 1973 study (the latest available) determined that six percent of the aged population is institutionalized in psychiatric and long-stay hospitals or nursing homes Institutionalized persons had more frequent admissions and a longer average length of stay than did the noninstitutionalized elderly [Deacon 1977] This study also determined that the institushytionalized elderly used 25 times more physician sershyvices and twice as many drug prescriptions per capita than did their noninstitutionalized counterparts Thus Table 2 significantly underestimates hospital use by the elderly

HEALTH CARE FINANCING REVIEWSPRING 1980 80

It is also necessary to evaluate peoples health exshypenditures in the year of their death to assess the underestimate of the values in Table 2 The Health Inshyterview Survey captures only about half of the health care use of persons dying in the survey year The following table presents the disproportionate share of Medicare dollars spent for aged persons who died in 1976

Technical Note C

Table A Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Years 197819771976 19701965

Table B Estimated Personal Health Care Expenshyditures under Public Programs by Type of Expenditure and Source of Funds for Three Age Groups for Calendar Years 19781977 1976 1970 1965

Table C Expenditures for Health Services and Supshyplies under Public Programs by Program for Three Age Groups for Calendar Years 1978 19771976 1970 1965

Table D Estimated Amount and Percentage Distribution of Personal Health Care Exshypenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 197819771976 1970 1965

Distribution of Medicare Expenditures for Persons Who Died in 1976

Percent of Medicare Percent of Total Recipients Who Died Medicare Dollars

Age Group in 1976 Spent for Those Recipients

All ages 65 and Over 79 207

65-69 40 15370-74 58 18575-79 80 20380-84 118 24985 and Over 198 321

Source Unpublished HCFA data

TABLE A

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1978

All Ages Under 19 19-64 65 and Over

Type of Expenditure Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate amount (in millions)

Total $167911 $102870 $65042 $19875 $14180 $5696 $98668 $70497 $28172 $49366 $18192 $31175

Hospital Care 76025 35107 40919 7070 3835 3235 47785 28626 19159 21169 2645 18524 PhysiciansServices 35250 25811 9439 5215 4382 833 21124 17808 3316 8910 3620 5290 Dentists Services 13300 12761 539 2780 2546 234 9137 8876 261 1383 1338 45 Other Professional Services 4275 3303 972 398 193 205 2787 2480 307 1090 631 459 Drugs and Drug Sundries 15098 13798 1300 2823 2650 173 9044 8419 625 3231 2728 503 Eyeglasses and Appliances 3879 3522 357 481 459 22 2793 2659 134 605 405 201 Nursing-Home Care 15751 7394 8358 68 1 67 3057 600 2457 12624 6790 5834 Other Health Services 4333 1175 3158 1040 113 927 2941 1028 1913 354 35 319

Per Capita Amount Total $75298 $46131 $29167 $28607 $20410 $8199 $76396 $54584 $21813 $202619 $74668 $127955

Hospital Care 34093 15743 18350 10176 5520 4656 36998 22164 14834 86886 10856 76030 PhysiciansServices 15808 11575 4233 7506 6307 1199 16356 13788 2567 36570 14858 21712 DentistsServices 5964 5723 242 4001 3665 337 7075 6872 202 5676 5492 185 Other Professional Services 1917 1481 436 573 278 295 2158 1920 238 4474 2590 1884 Drugs and Drug Sundries 6770 6187 583 4063 3814 249 7002 6519 484 13261 11197 2064 Eyeglasses and Appliances 1740 1579 160 692 661 32 2162 2059 104 2483 1662 825 Nursing-Home Care 7064 3316 3748 100 01 96 2367 465 1902 51814 27869 23945 Other Health Services 1943 527 1416 1497 163 1334 2277 796 1481 1453 144 1310

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 453 341 629 356 270 568 484 406 680 429 145 594 PhysiciansServices 210 251 145 262 309 146 214 253 118 180 199 170 Dentists Services 79 124 8 140 180 41 93 126 9 28 74 1 Other Professional Services 25 32 15 20 14 36 28 35 11 22 35 15 Drugs and Drug Sundries 90 134 20 142 187 30 92 119 22 65 150 16 Eyeglasses and Appliances 23 34 5 24 32 4 28 38 5 12 22 6 Nursing-Home Care 94 72 129 3 mdash 12 31 9 87 256 373 187 Other Health Services 26 11 49 52 8 163 30 15 68 7 2 10

8 1 HEALTH CARE FINANCING REVIEW SPRING 1980

The percentage of persons reporting limitation of activity (in the Health Interview Survey for 1974) acshycelerates with age and accelerates faster for men than for women (Figure 1) As people age an increasshying proportion suffers from some chronic condition reshyquiring medical attention

The 14 percent of the population who suffered a chronic condition accounted for 37 percent of all short-stay hospital discharges for 55 percent of all short-stay hospital days and for 28 percent of all out-of-hospital physician visits Chronically impaired pershysons account for an increasing share of hospital discharges as age increases (Figure 2)

For males each percentage point increase in the proportion of an age group suffering a chronic condishytion (Figure 1) is associated with an increase of 45 hospital discharges per 10000 persons For females a percentage point increase in the same proportion is associated with an increase of 38 hospital discharges per 10000 persons In the group aged 65 and over people with chronic conditions account for most of the hospitalization

The acceleration of the incidence of chronic condishytions shown in Figure 2 and of the implied use of health services related to these conditions is understated because two groups who use many health services are excluded institutionalized pershysonsmdashwho are limited in activity by definitionmdashand people who died before the survey

Increasing use of health care services associated with increases in chronic conditions are rooted in age-related degeneration of biological functions Accorshyding to one study each year of life after age 30 is acshycompanied by slightly less than one percent degeneration in a composite of ones functional capacity (Strehler 1977) This steady rate sets the stage for increasing death disease and impairment which are directly associated with health care use rates

TRENDS IN HEALTH CARE SPENDING Demographic Shifts

Personal health care spending for older people is rising as a percentage of the total and that for young people is falling as shown in Table 4

This trend results in part from the decrease in the proportion of the population under age 19mdasha decrease which began around 1965 Thirty-eight percent of the

population was under age 19 in 1965 the percentage dropped to 31 percent by 1978

This aging of the population tends to increase the intensity and therefore the costs of health care As shown previously health care for the young is generally less intense than for older age groups Therefore as the percent of total contacts with health care providers by the young diminishes due to their declining relative and absolute numbers the average intensity of service for the total population increases

Changes in fertility rates have affected hospitalizashytion rates for the child-bearing age group Hospital days of care for deliveries dropped 37 percent beshytween 1967 and 1977 from 410 days per 1000 females aged 15 to 44 in 1967 to 259 days in 1977 Decreasing birth rates also imply fewer physician visits and less prescription drug spending for this group (NCHS 19671977) This has a dual effect on health care use it reduces the number of persons needing health care and the number of women needing obstetrical care

Aging of the Aged

Within the group aged 65 and over the proportion of the very old is increasing Persons aged 85 and over comprised about 59 percent of the total populashytion of the nation in 1965 and 87 percent in 1978mdasha trend which may continue for some years

The impact of this trend on health care costs is significant In 1976 under Medicare persons aged 85 and over used 5484 days of short-stay hospital care per 1000 persons compared to 3684 days for all pershysons 65 and overmdasha 50 percent higher rate (unshypublished HCFA data) The rate for persons under age 65 was 894 days per 1000 persons Further persons aged 85 and above accounted for 35 percent of all nursing home days of care in 1977 [NNHS 1977] while comprising only eight percent of the population aged 65 and over

IMPACT OF PUBLIC POLICY

The implementation of the Medicare and Medicaid programs and the Economic Stabilization Program [ESP] appear to explain changes in health care use and costs by age groups which are not associated with age-related biological factors

TABLE 4

Percentage Distribution of Personal Health Care Expenditures by Age Group Selected Calendar Years 1965-78

Age Group 1965 1970 1976 1977 1978

All Ages 1000 1000 1000 1000 1000

0-18 171 158 126 122 118 19-64 591 580 589 587 588 65 and Over 238 263 285 290 294

HEALTH CARE FINANCING REVIEW SPRING 1980 68

FIGURE 1 Percentage of Persons with Chronic Conditions by Age and Sex 1974

Per

cent

aae

497 5 0 shy

431

40 shy

30 shy

253

230

2 0 shy

1 0 - 92 86

40 33

0 shy

Under 17 17-44 45-64 65 and Over

AgeSex Group

Female

Male

HEALTH CARE FINANCING REVIEW SPRING 1980 6 9

FIGURE 2 Hospital Discharge Rate by Age and Sex Total and Those Attributable to Persons

with Chronic Conditions 1974 D

isch

arg

e

Rat

e pe

r 1

000

Popula

tion

300shy

281

240shy 235

211 204

180shy181

169 163

120shy106

93

60 shy66

75 80

39 29

7 8

0 -Female Male

Under 17

Female Male

17-44

Female | Male

45-64

Female] Male

65 and Over

AgeSex Group

Chronic Conditions

Total Conditions

7 0 HEALTH CARE FINANCING REVIEW SPRING 1980

Medicare

With the implementation of Medicare in 1966 short-stay hospital admission rates for persons aged 65 andover increased rapidly To isolate age-related biological factors from other factors in the use of medical services Figure 3 was developed The figure displays the proportion of the aged population which had at least some hospital expense paid by Medicare for the years 196719681969 and 1976 The effect of biological age-related factors underlying hospitalizashytion rates is approximated by the slopes of the lines which show an increase of about 31 percent for each year after age 66 Although the rate of use by all pershysons (Figure 3) did not change over the early period hospitalization rates for all aged persons under Medicare did increase The vertical distances betweenthe lines in Figure 3 represent changes in overall hospitalization rates and reflect factors other than age-related biological ones

Figure 4 indicates that the Medicare program made hospital care affordable to the elderly and that the resulting influx of the aged into hospitals temporarily displaced younger patients Following that initial surge Medicare admission rates stablilized at about 300 per 1000 beneficiaries from fiscal year 1969 through fiscal year 1971 after which admission rates increased at a rate of two percentage points per year Admission rates for persons under age 65 increased sharply in 1970 and again between 1972 and 1974 before stabilizing

Hospital stays involving some surgery for persons aged 65 and over also increased but at a different rate In the early period from 1965 to 1972 hospital discharges with surgery per 1000 Medicare beneficiaries increased at an annual rate of 18 pershycent From 1972 to 1976 this surgical rate increased 29 percent annually

Upward trends in hospitalization and surgical rates for the aged are also associated with a shift in physishycians Medicare charges for services performed outshyside the hospital to services performed in the hospital as shown in Table 5

Evidently this shift in physicians charges from out-of-hospital to in-hospital care is related to increasing hospitalization rates and surgical rates Physicians charges are generally higher for hospital visits than for out-of-hospital visits and average physicians surgical charges generally far exceed average chargesfor other types of service Both out-of-hospital visits to physicians and the number of hospital days used per capita by aged persons remained relatively stable during the period 1971 through 1977 Total physician

visits did not change significantly but inpatient visits and surgical services as a proportion of total visits inshycreased leading to a shift in physicians charges toward more expensive types of care

Medicaid Changes in the Medicaid program may also help exshy

plain the variation in admission rates shown in Figure 4 The Medicaid program formally begun in January 1966 is a joint State-Federal program in which States participate at their option Ail but two States joined the program between 1965 and 1970 Alaska joined in fiscal year 1973 Arizona is the only State without a Medicaid program The last major influx of Medicaid participants occurred in January 1970 when seven States joined the program

The number of persons under age 65 eligible for Medicaid due to disability increased significantly betshyween 1969 and 1970 These persons are extensive users of hospital care and their enrollment in Medicaid partially explains the increase in admission rates for persons under age 65 in 1970mdasha year in which admission rates for aged persons did not change

The Economic Stabilization Program

The resumption of increases in hospital admission rates for aged persons increasing surgical hospitalizations a shift of physicians charges toward care in the hospital and an increase in admission rates for persons under age 65 coincided with the start of the Economic Stabilization Program (ESP) in fiscal year 1972 For most of its effective life the ESP restricted increases in hospital costs per admission and physicians charges per procedure but did not restrict increases in hospital admissions or in total physicians services Since the ESP had no effective limitation on the volume of services one interpretashytion of the data is that hospitals and physicians responded to the ESP requirements by allowing hospital admission rates to increase

After the ESP ended in early 1974 overall admission rates seemed to stabilize although admission rates for aged persons continued to increase

Changes in the rate of surgical operations per capita paralleled changes in admission rates over the period 1967-1978 Surgical rates per capita increased at an annual rate of 18 percent from the year ending in June 1967 to 1971 they increased at an annual rate of 32 percent from 1971 through 1974 and have decelerated to an annual rate of increase of 21 pershycent since 1974 [AHA Panel Survey]

TABLE 5 Physicians Services Charges Under Medicare for Persons Aged 65 and Over for Selected Calendar

Years 1971-1977 (amounts in billions)1

1971 1972 1976 1977

Amount Percent Amount Percent Amount Percent Amount Percent

Allowed ChargesInpatient Hospital

Out-of-Hospital1

$28 16

12

1000 568

432

$30 17

13

1000 576

424

$50 30

20

1000 600

400

$59 36

23

1000 607

393

1 Excludes outpatient hospital billing for physicians services Source Current Medicare Surveys

HEALTH CARE FINANCING REVIEW SPRING 1980 71

FIGURE 3 Persons Hospitalized per 1000 Medicare Beneficiaries by Age

Calendar Years 19671968 1969 and 1976 P

erso

ns H

osp

italiz

ed

per

10

00 B

enefic

iaries

300

250

1976

1969

bull 1968

bull 1967

200

150

100 66 68 70 72 74 76

Age

78 80 82 84

7 2 HEALTH CARE FINANCING REVIEW SPRING 1980

FIGURE 4 Short-Stay Hospital Admission Rates for Selected Populations

Years Ending June 1967-78

350

Adm

issi

ons

per

100

0 P

opul

atio

n

330shy

310

290

250shy

170shy

150shy

130shy

110shy

Total Population

Persons Under Age 65

Medicare Admissions Age 65 and Over

1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978

HEALTH CARE FINANCING REVIEW SPRING 1980 7 3

The Cost of Living Council in its evaluation of the early part of the ESP program reported that controls on hospital charges shifted the burden of increasing hospital expenses toward cost reimbursement proshygrams such as Medicare and Medicaid and away fromcharge reimbursement payment mechanisms such as private insurance Because Medicare and Medicaid serve mainly the aged and children while charge reimshybursement serves many of the 19 to 64 age group the early ESP regulations tended to shift increasing hospital costs to the aged and those 18 and under This affected the age distribution of hospital care exshypenses

Channels of Payment

PUBLIC CHANNELS

Public funding of health care for all age groups has been shifting from State and local governments to the Federal government In 1965 the main sources of public financing of health care were State and local governments which provided over half of the $79 billion in public money spent for health care Most of these non-Federal public funds were spent for the mid-age group which comprised the largest proportion of persons in non-Federal government psychiatric hospitals By 1970 the State and local share of public health care spending had declined to 35 percent and

by 1978 the share was down to 29 percent The decline in the percentage of health care spending by State and local governments may be traced to two factors the growth of Federal programs which parshytially replaced State and local public assistance spending for medical care and the decrease in populashytions of State and local governmental psychiatric hospitals The Federal share of total public health care spending grew from 48 percent in 1965 to 71 pershycent in 1978 Between 1965 and 1978 inclusively the Federal share grew from 51 percent to 86 percent for the aged from 43 percent to 57 percent for the midshyage group and from 61 percent to 66 percent for pershysons under age 19 The distribution of total personal health spending in 1978 by age group and source of public payment is displayed in Figure 5

In 1965 the Veterans Administration the Departshyment of Defense and workers compensation also proshyvided health caremdashmainly for the mid-age group These programs spent $275 billion and accounted for 35 percent of all public spending in 1965 In 1978 they spent $116 billion but their share of public spending diminished to 17 percent reflecting the rapid growth in Medicare and Medicaid spending Public financing as a percent of all health care funding grew rapidly after the introduction of Medicare and Medicaid in 1966 but more recently appears to have stabilized for all age groups (Table 6) Although public funding of personal health care expenditures continues to grow State and local funding as a percent of total expenshyditures had declined

TABLE 6

Percentage Distribution of Funding for Personal Health Care for Selected Calendar Years 1965 to 1978

Age Group 1978 1977 1970 1970 1965

All Ages Total 1000 1000 1000 1000 1000

Private 613 610 609 659 789 Public 387 390 391 341 211

Federal 277 276 275 222 101 State and Local 110 114 116 120 110

Under age 19 Total 1000 1000 1000 1000 1000

Private 713 715 711 761 845 Public 287 285 285 239 155

Federal 189 187 193 142 94 State and Local 98 98 97 97 61

Ages 19-64 Total 1000 1000 1000 1000 1000

Private 714 712 711 754 808 Public 286 288 289 246 192

Federal 162 160 160 111 83 State and Local 124 128 128 135 110

Ages 65 and Over Total 1000 1000 1000 1000 1000

Private 368 361 355 388 701 Public 632 639 645 612 299

Federal 542 547 547 513 154 State and Local 89 92 98 99 144

HEALTH CARE FINANCING REVIEW SPRING 1980 74

FIGURE 5 Percentage Distribution of Personal Health Care Expenditures by Source of Funds and Age Group

Calendar Year 1978

$986 billion

72

$494 billion

37

9

$199 billion 12

54 71

16 10 19

Under 19 19-64 65 and over

Age Group

Private

State and Local Government

Federal Government

HEALTH CARE FINANCING REVIEW SPRING 1980 7 5

Medicare and Medicaid

Two-thirds of all public financing of health care is provided by Medicare and Medicaid Although Medicare finances health care primarily for aged pershysons Medicaid finances health care for all ages as shown by Table 7

TABLE 7 Percent of Total Personal Health Care

Expenditures Financed by Public Programs 1978

Age Group Medicare Medicaid Other

All ages 148 109 130 Under 19 2 158 127 19-64 32 87 167 65 and Over 441 134 57

Medicare In 1978 Medicare provided 44 percent of all health

care costs for the aged compared to 39 percent in 1970 Part of this increase can be attributed to the risshying proportion of hospital care funded by Medicare Medicare paid 71 percent of hospital care costs in 1970 and 75 percent in 1978 This increase was not due to explicit policy decisions It resulted from changes in the mix of psychiatric and non-psychiatric hospital care Between 1955 and 1978 the average daily census in psychiatric hospitals fell from 677000 patients to 190000 patients the age distribution of the average daily census remained fairly constant Consequently community hospital days grew as a share of total hospital days for the aged This increasshying proportion of more highly reimbursed care has caused the increase in the Medicare share of total hospital care for the aged

The proportion of physician expenses paid by Medicare also has increased This occurred because the Medicare annual deductible increased from $50 to $60 in 1973 but has not changed since despite rapid increases in allowed charges for physicians care Table 8 shows that from 1971 to 1977 the deductible expense for physicians services under Medicare decreased from about 19 percent to 12 percent of all allowed charges

TABLE 8 Physicians Services Percentage Distribution of Reimbursements Coinsurance and Deductibles

Selected Calendar Years 1971-1977

1977

Percent

Allowed Charges 1000

Reimbursement 707Coinsurance 177Deductible 116Source Unpublished HCFA data

Medicaid

Medicaid pays a significant part of hospital and physician care costs for persons under age 19 In 1977 about a fourth of all hospital spending and about one dollar of every eight spent for physician care for this group was financed by Medicaid (Table 9) Medicaid paid 39 percent of nursing home costs for persons aged 65 and over in 1978 It appears that the proportion of nursing home care costs paid by Medicaid and Medicare has been decreasing in recent years

In 1978 the program spent $86 billion for persons aged 19 to 64 which represented 47 percent of total Medicaid expenditures Two groups of Medicaid recishypients in this mid-age range accounted for most of these expenditures disabled persons under age 65 who comprised about one-ninth of all Medicaid recishypients but for whom about one-fifth of all Medicaid expenditures were made and adults in families with dependent children who comprised about one-fifth of all Medicaid recipients and for whom about one-sixth of all Medicaid expenditures were made

197(5 1972 1971

Percent Percent Percent

1000 1000 1000

688 175 127

655 164 181

650 162 188

THE INTERACTION OF PRIVATE AND PUBLIC CHANNELS

Direct or out-of-pocket payments and private inshysurance financed most health care costs for younger age groups while public monies dominated funding for aged persons Major channels of payment for all age groups in 1977 are shown in Table 9 by selected types of medical care

Hospitals were the major recipients of public and private funding for health care receiving 34 percent of private funds and 63 percent of public funds The changing structure of source of payment for hospital care is an important determinant of public and private health care funding policy Although no comprehenshysive survey of sources of payment for hospital care by age group is available data from various public and private sources may be merged to estimate the flow of funds by age group in the hospital industry Table 10 represents this flow of funds for the years 1970 and 1977 Medicare provided an increasing share of

HEALTH CARE FINANCING REVIEWSPRING 1980 76

FIGURE 6 Per Capita Personal Health Care Expenditures for the Aged

by Source of Funds and by Type of Care Calendar Year 1978

$2026

Private $746

Other Public $115|

Programs

Medicaid $271

$869

$109 $792

Medicaid $81

-$31

$490

Medicare $893

$366

$648 $149 $30

Medicare $3

-$11 $230

$2031

bull$42

Total Hospital Physicians All Other Care Services

HEALTH CARE FINANCING REVIEW SPRING 1980 7 7

TABLE 9

Percentage Distribution of Health Care Expenditures by Channels of Payment for Hospital Care Physicians Services and All Other Health Care Services Calendar Year 1977

Private Public

Private Direct Health

Age Group Total Total Payments Insurance Other Total Medicare Medicaid Other

All Personal Health Care All Ages 1000 610 318 279 13 390 146 112 132 Under 19 1000 715 381 327 7 285 1 156 128 19-64 1000 712 319 374 19 288 30 89 169 65 and Over 1000 361 291 66 4 639 442 138 59

Hospital Care All Ages 1000 456 83 362 11 544 239 95 210 Under 19 1000 546 37 507 2 454 mdash 250 204 19-64 1000 592 107 469 16 408 49 96 263 65 and Over 1000 120 46 71 3 880 747 39 94

Physician Care All Ages 1000 741 339 401 1 259 147 60 52 Under 19 1000 844 387 457 mdash 156 4 121 31 19-64 1000 845 357 486 1 155 24 56 75 65 and Over 1000 418 262 155 mdash 582 542 31 9

All Other Care All Ages 1000 739 625 90 24 261 19 167 75 Under 19 1000 785 702 69 15 215 - 92 123 19-64 1000 812 634 140 38 188 2 102 84 65 and Over 1000 606 580 19 7 394 53 299 42

community and related hospital spending and private insurance declined due to the extension of Medicare coverage to certain disabled persons under age 65

The proportion of hospital spending for the aged paid by Medicare decreased slightly over the period According to Medicare actuaries more than a million persons aged 65 and over are ineligible for hospital inshysurance under Medicare These persons are predominantly retired government employees whose private insurance continues at retirement and covers most of their physician and hospital care

DIRECT PAYMENTS BY PERSONS AGED 65 AND OVER

Out-of-pocket payments for health care continue to be a major expense for aged persons In 1977 pershysons aged 65 and over paid 29 percent of their health care costs out-of-pocket The amounts paid out-ofshypocket vary considerably by the type of care provided

The out-of-pocket liability of the elderly for hospital care has changed dramatically since 1965mdashthe year before Medicare and Medicaid began About 13 pershycent of spending for hospital care was paid out-ofshypocket in 1965 compared to less than five percent by 1977

The elderly make out-of-pocket payments for physishycians care for that part of the deductible and coinshysurance not paid by Medicaid or private insurance for physicians charges not allowed by Medicare but colshylectable from beneficiaries and for medical services not covered by Medicare Physicians billings to pashytients for charges denied by Medicare because the charges exceed the allowed amounts add a signifishycant amount to patients liabilities generally not covered by private insurance Through 1976 the percentage of total physicians charges paid by Medicare declined because of the growing obligations of Medicare beneficiaries for physicians charges on unassigned claims that were submitted by physishycians but disallowed These disallowed charges to beneficiaries increased from two percent of the total physician bill for the aged in fiscal year 1968 to about 10 percent in calendar year 1976 where they remained through 1978 In dollar terms these out-of-pocket exshypenses for physicians services were about $84 per capita in 1977 and preliminary estimates indicate that the costs will rise to about $96 per capita in 1978

Payment for nursing home care represents the largest health care liability for persons aged 65 and overmdashestimated at $271 per capita in 1978 up from $228 in 1977 and $109 in 1970 About 52 percent of nursing home care was financed out-of-pocket by beneficiaries in 1978

HEALTH CARE FINANCING REVIEW SPRING 1980 78

TABLE 10

Hospital Expenditures and Percentage Distribution of Channels of Payment by Type of Hospital and Age Group Calendar Years 1970 and 1977 (Dollar amounts In millions)

1977 1970

65 and 65 and Total Under 19 19-64 Over Total Under 19 19-64 Over

Psychiatric Hospitals (non-Federal) $4015 $199 $2632 $1184 $2534 $81 $1710 $744 State and Local Hospitals

Sources of Payment-Total 1000 100-0 1000 1000 1000 1000 1000 1000 Medicare 17 mdash 4 49 5 mdash mdash 16 Medicaid 187 347 153 236 110 37 5 359 Other Federal 15 70 15 5 15 99 15 5 Other State and Local 446 85 465 465 701 741 791 489 Private Health Insurance 140 412 180 6 10 37 12 1 Direct Payment 195 85 183 239 159 86 176 129

Private Hospitals $661 $33 $433 $195 $258 $8 $174 $76

Sources of Payment-Total 1000 1000 1000 1000 1000 1000_ 1000 1000 Medicare 17 - 5 46 35 mdash mdash 118 Other State and Local 11 30 12 5 19 mdash 29 mdash Private Health Insurance 700 848 774 508 481 375 483 487 Philanthropy 39 30 39 41 39 125 34 39 Direct Payments 234 91 171 400 426 500 454 355

Federal Hospitals $6099 $747 $4595 $757 $2822 $499 $2025 $349

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Veterans Administration 586 - 636 856 533 mdash 599 828 Department of Defense 322 631 312 83 380 835 328 92 Other 92 369 52 61 88 165 73 80

Other Hospitals $57139 $5572 $34806 $16761 $22184 $2901 $13397 $5885

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Medicare 282 1 60 838 223 mdash - 842 Medicaid 99 281 105 27 88 169 99 23 Workers Compensation 23 mdash 37 2 23 mdash 38 3 State and Local Public Assistance 7 3 11 2 9 11 11 2 Other State and Local 59 13 86 19 70 95 87 19 Department of Defense 7 18 9 1 11 30 11 1 Other Government Programs 15 66 10 6 9 23 10 1 Philanthropy 12 3 19 2 15 5 19 10 Private Health Insurance 412 576 548 76 444 588 585 54 Direct Payments 83 40 115 28 107 80 140 44

Payments for drugs and drug sundries and for denshytists services are another major expense Precise dollar amounts for these payments are not currently available although surveys now under way will proshyvide estimates of out-of-pocket expenses for these types of care as well as for other health services Out-of-pocket spending for drugs and dentists sershyvices is estimated at $150 per capita in 1977 and $160 in 1978

Medicare Supplementary Medical Insurance (SMI) and private health insurance premiums are also paid out-of-pocket at a rate of $78 per capita for SMI and $90 per capita for private health insurance Persons aged 65 and over paid an average of about $698 for health related services and items out-of-pocket in 1977mdashrepresenting 12 percent of their $5900 average income

Conclusions Spending for health care varies significantly by age

group Per capita health spending increases steadily with age for most health care sectors

Young persons are spending a decreasing share of the health dollar because they are declining as a pershycent of the total population Private sources of payshyment provide most of the health expenses for the young

The middle age group spends most of the health care dollar because it is the largest age group Most health expenses for this group are paid by private sources

Persons aged 65 and over continue to increase steadily as a percent of the total population The health care needs of these persons shown by current use of various sectors of health care are expected to

HEALTH CARE FINANCING REVIEW SPRING 1980 79

grow along with their numbers resulting in an inshycreasing share of personal health care spending for and by the elderly Public financing has been and conshytinues to be the major source of funding for personal health care costs for the aged As the aged populashytion continues to grow in the future the need for public financing of health care costs is expected to increase especially for those types of care which aged persons use more oftenmdashhospital care physishycians services and nursing home care The populashytion within the age group 65 and over is aging and is expected to add to the need for health care services especially nursing home care Health care policy and financing must continue to cope with these trends which are expected to continue for many years to come

AcknowledgmentsThe author is indebted to Mary E Rieder Acting Director

of the Division of National Cost Estimates to members of the Division of National Cost Estimates and Intern Karen Young for their comments and suggestions and to Joanie Henderson and Ann Leake for secretarial assistance

Technical Note A

CONCEPTS AND DEFINITIONS

All estimates in this report relate to personal health care expendituresmdashthat portion of the total national health care expense representing health services and supplies received directly by individuals They make up total national expenditures for health together with spending for research and medical facilities conshystruction identifiable administrative costs of governshyment programs government public health activities expenses incurred by philanthropic organizations in raising funds for health care and the net costs of private health insurance (the difference between premiums and benefit payments)

All expenditures for health care that are channeled through any program established by public law are treated as public expenditures in these estimates Exshypenditures under workers compensation programs for example are included with government expenshyditures although they involve benefits paid by private insurers from premiums collected from private sources

Funds disbursed by public programs are reported as program expenditures even for example when they include significant private contributions made by beneficiaries as in the Supplementary Medical Inshysurance (SMI) program The benefit expenditures reported in this series are not adjusted to eliminate the duplication that exists when payments are made by State governments into the Medicare trust fund in the form of SMI premiums for public assistance and Supplemental Security Income (SSI) recipients and they are reported as Medicaid expenditures The amount paid by Medicaid as premiums in 1978 was $288 million for all beneficiaries that portion not reshytained in the trust fund is duplicated as a Medicare expense The amount does not noticeably affect the relationships that are reported

Health expenditures by State and local governshyments that involve funds received from the Federal government under revenue sharing are reported as State and local expenditures not as Federal expenshyditures These funds amounted to $232 million in the first half of fiscal year 1976 the latest period for which data are available No information is available on the use of such funds by specific programs

Responsibility for compiling estimates of national health care spending now resides with the Health Care Financing Administration (HCFA) Department of Health and Human Services Definitions of the various types of health care and descriptions of the public programs are contained in the various articles in the series carrying estimates for expenditures (Gibson 1979 Carroll 1979)

It should be noted that hospital care includes all exshypenditures for care in hospitalsmdashboth inpatient and outpatient The data cover all services and supplies provided

Population estimates used here are selected to corshyrespond to the population covered by expenditure estimates Since national health expenditures cover all spending for or by United States citizens and residents population estimates include the institushytionalized population the Armed Forces (both in the United States and overseas) Federal civilian employees overseas and the civilian population of outlying areas

The group under age 19 presents some problems in connection with the available demographic informashytion on utilization and expenditures Extensive intershypolation is often required to estimate certain types of expenditures for this group Because of the nature of some data sources expenses for certain persons under age 19 who are part of the labor force are not separable from those aged 19 to 64 and expenses of dependent children over age 18 are included with those of the younger group

Technical Note B

The Health Interview Survey (HIS) which provided the data for Table 2 continuously samples members of households It was not intended to obtain complete information on the deceased nor on the six percent of the aged population who are institutionalized Thus Table 2 tends to underestimate the volume of services used by the aged The degree of this underestimation can be evaluated by comparing the statistics in Table 2 to other data A 1973 study (the latest available) determined that six percent of the aged population is institutionalized in psychiatric and long-stay hospitals or nursing homes Institutionalized persons had more frequent admissions and a longer average length of stay than did the noninstitutionalized elderly [Deacon 1977] This study also determined that the institushytionalized elderly used 25 times more physician sershyvices and twice as many drug prescriptions per capita than did their noninstitutionalized counterparts Thus Table 2 significantly underestimates hospital use by the elderly

HEALTH CARE FINANCING REVIEWSPRING 1980 80

It is also necessary to evaluate peoples health exshypenditures in the year of their death to assess the underestimate of the values in Table 2 The Health Inshyterview Survey captures only about half of the health care use of persons dying in the survey year The following table presents the disproportionate share of Medicare dollars spent for aged persons who died in 1976

Technical Note C

Table A Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Years 197819771976 19701965

Table B Estimated Personal Health Care Expenshyditures under Public Programs by Type of Expenditure and Source of Funds for Three Age Groups for Calendar Years 19781977 1976 1970 1965

Table C Expenditures for Health Services and Supshyplies under Public Programs by Program for Three Age Groups for Calendar Years 1978 19771976 1970 1965

Table D Estimated Amount and Percentage Distribution of Personal Health Care Exshypenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 197819771976 1970 1965

Distribution of Medicare Expenditures for Persons Who Died in 1976

Percent of Medicare Percent of Total Recipients Who Died Medicare Dollars

Age Group in 1976 Spent for Those Recipients

All ages 65 and Over 79 207

65-69 40 15370-74 58 18575-79 80 20380-84 118 24985 and Over 198 321

Source Unpublished HCFA data

TABLE A

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1978

All Ages Under 19 19-64 65 and Over

Type of Expenditure Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate amount (in millions)

Total $167911 $102870 $65042 $19875 $14180 $5696 $98668 $70497 $28172 $49366 $18192 $31175

Hospital Care 76025 35107 40919 7070 3835 3235 47785 28626 19159 21169 2645 18524 PhysiciansServices 35250 25811 9439 5215 4382 833 21124 17808 3316 8910 3620 5290 Dentists Services 13300 12761 539 2780 2546 234 9137 8876 261 1383 1338 45 Other Professional Services 4275 3303 972 398 193 205 2787 2480 307 1090 631 459 Drugs and Drug Sundries 15098 13798 1300 2823 2650 173 9044 8419 625 3231 2728 503 Eyeglasses and Appliances 3879 3522 357 481 459 22 2793 2659 134 605 405 201 Nursing-Home Care 15751 7394 8358 68 1 67 3057 600 2457 12624 6790 5834 Other Health Services 4333 1175 3158 1040 113 927 2941 1028 1913 354 35 319

Per Capita Amount Total $75298 $46131 $29167 $28607 $20410 $8199 $76396 $54584 $21813 $202619 $74668 $127955

Hospital Care 34093 15743 18350 10176 5520 4656 36998 22164 14834 86886 10856 76030 PhysiciansServices 15808 11575 4233 7506 6307 1199 16356 13788 2567 36570 14858 21712 DentistsServices 5964 5723 242 4001 3665 337 7075 6872 202 5676 5492 185 Other Professional Services 1917 1481 436 573 278 295 2158 1920 238 4474 2590 1884 Drugs and Drug Sundries 6770 6187 583 4063 3814 249 7002 6519 484 13261 11197 2064 Eyeglasses and Appliances 1740 1579 160 692 661 32 2162 2059 104 2483 1662 825 Nursing-Home Care 7064 3316 3748 100 01 96 2367 465 1902 51814 27869 23945 Other Health Services 1943 527 1416 1497 163 1334 2277 796 1481 1453 144 1310

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 453 341 629 356 270 568 484 406 680 429 145 594 PhysiciansServices 210 251 145 262 309 146 214 253 118 180 199 170 Dentists Services 79 124 8 140 180 41 93 126 9 28 74 1 Other Professional Services 25 32 15 20 14 36 28 35 11 22 35 15 Drugs and Drug Sundries 90 134 20 142 187 30 92 119 22 65 150 16 Eyeglasses and Appliances 23 34 5 24 32 4 28 38 5 12 22 6 Nursing-Home Care 94 72 129 3 mdash 12 31 9 87 256 373 187 Other Health Services 26 11 49 52 8 163 30 15 68 7 2 10

8 1 HEALTH CARE FINANCING REVIEW SPRING 1980

FIGURE 1 Percentage of Persons with Chronic Conditions by Age and Sex 1974

Per

cent

aae

497 5 0 shy

431

40 shy

30 shy

253

230

2 0 shy

1 0 - 92 86

40 33

0 shy

Under 17 17-44 45-64 65 and Over

AgeSex Group

Female

Male

HEALTH CARE FINANCING REVIEW SPRING 1980 6 9

FIGURE 2 Hospital Discharge Rate by Age and Sex Total and Those Attributable to Persons

with Chronic Conditions 1974 D

isch

arg

e

Rat

e pe

r 1

000

Popula

tion

300shy

281

240shy 235

211 204

180shy181

169 163

120shy106

93

60 shy66

75 80

39 29

7 8

0 -Female Male

Under 17

Female Male

17-44

Female | Male

45-64

Female] Male

65 and Over

AgeSex Group

Chronic Conditions

Total Conditions

7 0 HEALTH CARE FINANCING REVIEW SPRING 1980

Medicare

With the implementation of Medicare in 1966 short-stay hospital admission rates for persons aged 65 andover increased rapidly To isolate age-related biological factors from other factors in the use of medical services Figure 3 was developed The figure displays the proportion of the aged population which had at least some hospital expense paid by Medicare for the years 196719681969 and 1976 The effect of biological age-related factors underlying hospitalizashytion rates is approximated by the slopes of the lines which show an increase of about 31 percent for each year after age 66 Although the rate of use by all pershysons (Figure 3) did not change over the early period hospitalization rates for all aged persons under Medicare did increase The vertical distances betweenthe lines in Figure 3 represent changes in overall hospitalization rates and reflect factors other than age-related biological ones

Figure 4 indicates that the Medicare program made hospital care affordable to the elderly and that the resulting influx of the aged into hospitals temporarily displaced younger patients Following that initial surge Medicare admission rates stablilized at about 300 per 1000 beneficiaries from fiscal year 1969 through fiscal year 1971 after which admission rates increased at a rate of two percentage points per year Admission rates for persons under age 65 increased sharply in 1970 and again between 1972 and 1974 before stabilizing

Hospital stays involving some surgery for persons aged 65 and over also increased but at a different rate In the early period from 1965 to 1972 hospital discharges with surgery per 1000 Medicare beneficiaries increased at an annual rate of 18 pershycent From 1972 to 1976 this surgical rate increased 29 percent annually

Upward trends in hospitalization and surgical rates for the aged are also associated with a shift in physishycians Medicare charges for services performed outshyside the hospital to services performed in the hospital as shown in Table 5

Evidently this shift in physicians charges from out-of-hospital to in-hospital care is related to increasing hospitalization rates and surgical rates Physicians charges are generally higher for hospital visits than for out-of-hospital visits and average physicians surgical charges generally far exceed average chargesfor other types of service Both out-of-hospital visits to physicians and the number of hospital days used per capita by aged persons remained relatively stable during the period 1971 through 1977 Total physician

visits did not change significantly but inpatient visits and surgical services as a proportion of total visits inshycreased leading to a shift in physicians charges toward more expensive types of care

Medicaid Changes in the Medicaid program may also help exshy

plain the variation in admission rates shown in Figure 4 The Medicaid program formally begun in January 1966 is a joint State-Federal program in which States participate at their option Ail but two States joined the program between 1965 and 1970 Alaska joined in fiscal year 1973 Arizona is the only State without a Medicaid program The last major influx of Medicaid participants occurred in January 1970 when seven States joined the program

The number of persons under age 65 eligible for Medicaid due to disability increased significantly betshyween 1969 and 1970 These persons are extensive users of hospital care and their enrollment in Medicaid partially explains the increase in admission rates for persons under age 65 in 1970mdasha year in which admission rates for aged persons did not change

The Economic Stabilization Program

The resumption of increases in hospital admission rates for aged persons increasing surgical hospitalizations a shift of physicians charges toward care in the hospital and an increase in admission rates for persons under age 65 coincided with the start of the Economic Stabilization Program (ESP) in fiscal year 1972 For most of its effective life the ESP restricted increases in hospital costs per admission and physicians charges per procedure but did not restrict increases in hospital admissions or in total physicians services Since the ESP had no effective limitation on the volume of services one interpretashytion of the data is that hospitals and physicians responded to the ESP requirements by allowing hospital admission rates to increase

After the ESP ended in early 1974 overall admission rates seemed to stabilize although admission rates for aged persons continued to increase

Changes in the rate of surgical operations per capita paralleled changes in admission rates over the period 1967-1978 Surgical rates per capita increased at an annual rate of 18 percent from the year ending in June 1967 to 1971 they increased at an annual rate of 32 percent from 1971 through 1974 and have decelerated to an annual rate of increase of 21 pershycent since 1974 [AHA Panel Survey]

TABLE 5 Physicians Services Charges Under Medicare for Persons Aged 65 and Over for Selected Calendar

Years 1971-1977 (amounts in billions)1

1971 1972 1976 1977

Amount Percent Amount Percent Amount Percent Amount Percent

Allowed ChargesInpatient Hospital

Out-of-Hospital1

$28 16

12

1000 568

432

$30 17

13

1000 576

424

$50 30

20

1000 600

400

$59 36

23

1000 607

393

1 Excludes outpatient hospital billing for physicians services Source Current Medicare Surveys

HEALTH CARE FINANCING REVIEW SPRING 1980 71

FIGURE 3 Persons Hospitalized per 1000 Medicare Beneficiaries by Age

Calendar Years 19671968 1969 and 1976 P

erso

ns H

osp

italiz

ed

per

10

00 B

enefic

iaries

300

250

1976

1969

bull 1968

bull 1967

200

150

100 66 68 70 72 74 76

Age

78 80 82 84

7 2 HEALTH CARE FINANCING REVIEW SPRING 1980

FIGURE 4 Short-Stay Hospital Admission Rates for Selected Populations

Years Ending June 1967-78

350

Adm

issi

ons

per

100

0 P

opul

atio

n

330shy

310

290

250shy

170shy

150shy

130shy

110shy

Total Population

Persons Under Age 65

Medicare Admissions Age 65 and Over

1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978

HEALTH CARE FINANCING REVIEW SPRING 1980 7 3

The Cost of Living Council in its evaluation of the early part of the ESP program reported that controls on hospital charges shifted the burden of increasing hospital expenses toward cost reimbursement proshygrams such as Medicare and Medicaid and away fromcharge reimbursement payment mechanisms such as private insurance Because Medicare and Medicaid serve mainly the aged and children while charge reimshybursement serves many of the 19 to 64 age group the early ESP regulations tended to shift increasing hospital costs to the aged and those 18 and under This affected the age distribution of hospital care exshypenses

Channels of Payment

PUBLIC CHANNELS

Public funding of health care for all age groups has been shifting from State and local governments to the Federal government In 1965 the main sources of public financing of health care were State and local governments which provided over half of the $79 billion in public money spent for health care Most of these non-Federal public funds were spent for the mid-age group which comprised the largest proportion of persons in non-Federal government psychiatric hospitals By 1970 the State and local share of public health care spending had declined to 35 percent and

by 1978 the share was down to 29 percent The decline in the percentage of health care spending by State and local governments may be traced to two factors the growth of Federal programs which parshytially replaced State and local public assistance spending for medical care and the decrease in populashytions of State and local governmental psychiatric hospitals The Federal share of total public health care spending grew from 48 percent in 1965 to 71 pershycent in 1978 Between 1965 and 1978 inclusively the Federal share grew from 51 percent to 86 percent for the aged from 43 percent to 57 percent for the midshyage group and from 61 percent to 66 percent for pershysons under age 19 The distribution of total personal health spending in 1978 by age group and source of public payment is displayed in Figure 5

In 1965 the Veterans Administration the Departshyment of Defense and workers compensation also proshyvided health caremdashmainly for the mid-age group These programs spent $275 billion and accounted for 35 percent of all public spending in 1965 In 1978 they spent $116 billion but their share of public spending diminished to 17 percent reflecting the rapid growth in Medicare and Medicaid spending Public financing as a percent of all health care funding grew rapidly after the introduction of Medicare and Medicaid in 1966 but more recently appears to have stabilized for all age groups (Table 6) Although public funding of personal health care expenditures continues to grow State and local funding as a percent of total expenshyditures had declined

TABLE 6

Percentage Distribution of Funding for Personal Health Care for Selected Calendar Years 1965 to 1978

Age Group 1978 1977 1970 1970 1965

All Ages Total 1000 1000 1000 1000 1000

Private 613 610 609 659 789 Public 387 390 391 341 211

Federal 277 276 275 222 101 State and Local 110 114 116 120 110

Under age 19 Total 1000 1000 1000 1000 1000

Private 713 715 711 761 845 Public 287 285 285 239 155

Federal 189 187 193 142 94 State and Local 98 98 97 97 61

Ages 19-64 Total 1000 1000 1000 1000 1000

Private 714 712 711 754 808 Public 286 288 289 246 192

Federal 162 160 160 111 83 State and Local 124 128 128 135 110

Ages 65 and Over Total 1000 1000 1000 1000 1000

Private 368 361 355 388 701 Public 632 639 645 612 299

Federal 542 547 547 513 154 State and Local 89 92 98 99 144

HEALTH CARE FINANCING REVIEW SPRING 1980 74

FIGURE 5 Percentage Distribution of Personal Health Care Expenditures by Source of Funds and Age Group

Calendar Year 1978

$986 billion

72

$494 billion

37

9

$199 billion 12

54 71

16 10 19

Under 19 19-64 65 and over

Age Group

Private

State and Local Government

Federal Government

HEALTH CARE FINANCING REVIEW SPRING 1980 7 5

Medicare and Medicaid

Two-thirds of all public financing of health care is provided by Medicare and Medicaid Although Medicare finances health care primarily for aged pershysons Medicaid finances health care for all ages as shown by Table 7

TABLE 7 Percent of Total Personal Health Care

Expenditures Financed by Public Programs 1978

Age Group Medicare Medicaid Other

All ages 148 109 130 Under 19 2 158 127 19-64 32 87 167 65 and Over 441 134 57

Medicare In 1978 Medicare provided 44 percent of all health

care costs for the aged compared to 39 percent in 1970 Part of this increase can be attributed to the risshying proportion of hospital care funded by Medicare Medicare paid 71 percent of hospital care costs in 1970 and 75 percent in 1978 This increase was not due to explicit policy decisions It resulted from changes in the mix of psychiatric and non-psychiatric hospital care Between 1955 and 1978 the average daily census in psychiatric hospitals fell from 677000 patients to 190000 patients the age distribution of the average daily census remained fairly constant Consequently community hospital days grew as a share of total hospital days for the aged This increasshying proportion of more highly reimbursed care has caused the increase in the Medicare share of total hospital care for the aged

The proportion of physician expenses paid by Medicare also has increased This occurred because the Medicare annual deductible increased from $50 to $60 in 1973 but has not changed since despite rapid increases in allowed charges for physicians care Table 8 shows that from 1971 to 1977 the deductible expense for physicians services under Medicare decreased from about 19 percent to 12 percent of all allowed charges

TABLE 8 Physicians Services Percentage Distribution of Reimbursements Coinsurance and Deductibles

Selected Calendar Years 1971-1977

1977

Percent

Allowed Charges 1000

Reimbursement 707Coinsurance 177Deductible 116Source Unpublished HCFA data

Medicaid

Medicaid pays a significant part of hospital and physician care costs for persons under age 19 In 1977 about a fourth of all hospital spending and about one dollar of every eight spent for physician care for this group was financed by Medicaid (Table 9) Medicaid paid 39 percent of nursing home costs for persons aged 65 and over in 1978 It appears that the proportion of nursing home care costs paid by Medicaid and Medicare has been decreasing in recent years

In 1978 the program spent $86 billion for persons aged 19 to 64 which represented 47 percent of total Medicaid expenditures Two groups of Medicaid recishypients in this mid-age range accounted for most of these expenditures disabled persons under age 65 who comprised about one-ninth of all Medicaid recishypients but for whom about one-fifth of all Medicaid expenditures were made and adults in families with dependent children who comprised about one-fifth of all Medicaid recipients and for whom about one-sixth of all Medicaid expenditures were made

197(5 1972 1971

Percent Percent Percent

1000 1000 1000

688 175 127

655 164 181

650 162 188

THE INTERACTION OF PRIVATE AND PUBLIC CHANNELS

Direct or out-of-pocket payments and private inshysurance financed most health care costs for younger age groups while public monies dominated funding for aged persons Major channels of payment for all age groups in 1977 are shown in Table 9 by selected types of medical care

Hospitals were the major recipients of public and private funding for health care receiving 34 percent of private funds and 63 percent of public funds The changing structure of source of payment for hospital care is an important determinant of public and private health care funding policy Although no comprehenshysive survey of sources of payment for hospital care by age group is available data from various public and private sources may be merged to estimate the flow of funds by age group in the hospital industry Table 10 represents this flow of funds for the years 1970 and 1977 Medicare provided an increasing share of

HEALTH CARE FINANCING REVIEWSPRING 1980 76

FIGURE 6 Per Capita Personal Health Care Expenditures for the Aged

by Source of Funds and by Type of Care Calendar Year 1978

$2026

Private $746

Other Public $115|

Programs

Medicaid $271

$869

$109 $792

Medicaid $81

-$31

$490

Medicare $893

$366

$648 $149 $30

Medicare $3

-$11 $230

$2031

bull$42

Total Hospital Physicians All Other Care Services

HEALTH CARE FINANCING REVIEW SPRING 1980 7 7

TABLE 9

Percentage Distribution of Health Care Expenditures by Channels of Payment for Hospital Care Physicians Services and All Other Health Care Services Calendar Year 1977

Private Public

Private Direct Health

Age Group Total Total Payments Insurance Other Total Medicare Medicaid Other

All Personal Health Care All Ages 1000 610 318 279 13 390 146 112 132 Under 19 1000 715 381 327 7 285 1 156 128 19-64 1000 712 319 374 19 288 30 89 169 65 and Over 1000 361 291 66 4 639 442 138 59

Hospital Care All Ages 1000 456 83 362 11 544 239 95 210 Under 19 1000 546 37 507 2 454 mdash 250 204 19-64 1000 592 107 469 16 408 49 96 263 65 and Over 1000 120 46 71 3 880 747 39 94

Physician Care All Ages 1000 741 339 401 1 259 147 60 52 Under 19 1000 844 387 457 mdash 156 4 121 31 19-64 1000 845 357 486 1 155 24 56 75 65 and Over 1000 418 262 155 mdash 582 542 31 9

All Other Care All Ages 1000 739 625 90 24 261 19 167 75 Under 19 1000 785 702 69 15 215 - 92 123 19-64 1000 812 634 140 38 188 2 102 84 65 and Over 1000 606 580 19 7 394 53 299 42

community and related hospital spending and private insurance declined due to the extension of Medicare coverage to certain disabled persons under age 65

The proportion of hospital spending for the aged paid by Medicare decreased slightly over the period According to Medicare actuaries more than a million persons aged 65 and over are ineligible for hospital inshysurance under Medicare These persons are predominantly retired government employees whose private insurance continues at retirement and covers most of their physician and hospital care

DIRECT PAYMENTS BY PERSONS AGED 65 AND OVER

Out-of-pocket payments for health care continue to be a major expense for aged persons In 1977 pershysons aged 65 and over paid 29 percent of their health care costs out-of-pocket The amounts paid out-ofshypocket vary considerably by the type of care provided

The out-of-pocket liability of the elderly for hospital care has changed dramatically since 1965mdashthe year before Medicare and Medicaid began About 13 pershycent of spending for hospital care was paid out-ofshypocket in 1965 compared to less than five percent by 1977

The elderly make out-of-pocket payments for physishycians care for that part of the deductible and coinshysurance not paid by Medicaid or private insurance for physicians charges not allowed by Medicare but colshylectable from beneficiaries and for medical services not covered by Medicare Physicians billings to pashytients for charges denied by Medicare because the charges exceed the allowed amounts add a signifishycant amount to patients liabilities generally not covered by private insurance Through 1976 the percentage of total physicians charges paid by Medicare declined because of the growing obligations of Medicare beneficiaries for physicians charges on unassigned claims that were submitted by physishycians but disallowed These disallowed charges to beneficiaries increased from two percent of the total physician bill for the aged in fiscal year 1968 to about 10 percent in calendar year 1976 where they remained through 1978 In dollar terms these out-of-pocket exshypenses for physicians services were about $84 per capita in 1977 and preliminary estimates indicate that the costs will rise to about $96 per capita in 1978

Payment for nursing home care represents the largest health care liability for persons aged 65 and overmdashestimated at $271 per capita in 1978 up from $228 in 1977 and $109 in 1970 About 52 percent of nursing home care was financed out-of-pocket by beneficiaries in 1978

HEALTH CARE FINANCING REVIEW SPRING 1980 78

TABLE 10

Hospital Expenditures and Percentage Distribution of Channels of Payment by Type of Hospital and Age Group Calendar Years 1970 and 1977 (Dollar amounts In millions)

1977 1970

65 and 65 and Total Under 19 19-64 Over Total Under 19 19-64 Over

Psychiatric Hospitals (non-Federal) $4015 $199 $2632 $1184 $2534 $81 $1710 $744 State and Local Hospitals

Sources of Payment-Total 1000 100-0 1000 1000 1000 1000 1000 1000 Medicare 17 mdash 4 49 5 mdash mdash 16 Medicaid 187 347 153 236 110 37 5 359 Other Federal 15 70 15 5 15 99 15 5 Other State and Local 446 85 465 465 701 741 791 489 Private Health Insurance 140 412 180 6 10 37 12 1 Direct Payment 195 85 183 239 159 86 176 129

Private Hospitals $661 $33 $433 $195 $258 $8 $174 $76

Sources of Payment-Total 1000 1000 1000 1000 1000 1000_ 1000 1000 Medicare 17 - 5 46 35 mdash mdash 118 Other State and Local 11 30 12 5 19 mdash 29 mdash Private Health Insurance 700 848 774 508 481 375 483 487 Philanthropy 39 30 39 41 39 125 34 39 Direct Payments 234 91 171 400 426 500 454 355

Federal Hospitals $6099 $747 $4595 $757 $2822 $499 $2025 $349

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Veterans Administration 586 - 636 856 533 mdash 599 828 Department of Defense 322 631 312 83 380 835 328 92 Other 92 369 52 61 88 165 73 80

Other Hospitals $57139 $5572 $34806 $16761 $22184 $2901 $13397 $5885

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Medicare 282 1 60 838 223 mdash - 842 Medicaid 99 281 105 27 88 169 99 23 Workers Compensation 23 mdash 37 2 23 mdash 38 3 State and Local Public Assistance 7 3 11 2 9 11 11 2 Other State and Local 59 13 86 19 70 95 87 19 Department of Defense 7 18 9 1 11 30 11 1 Other Government Programs 15 66 10 6 9 23 10 1 Philanthropy 12 3 19 2 15 5 19 10 Private Health Insurance 412 576 548 76 444 588 585 54 Direct Payments 83 40 115 28 107 80 140 44

Payments for drugs and drug sundries and for denshytists services are another major expense Precise dollar amounts for these payments are not currently available although surveys now under way will proshyvide estimates of out-of-pocket expenses for these types of care as well as for other health services Out-of-pocket spending for drugs and dentists sershyvices is estimated at $150 per capita in 1977 and $160 in 1978

Medicare Supplementary Medical Insurance (SMI) and private health insurance premiums are also paid out-of-pocket at a rate of $78 per capita for SMI and $90 per capita for private health insurance Persons aged 65 and over paid an average of about $698 for health related services and items out-of-pocket in 1977mdashrepresenting 12 percent of their $5900 average income

Conclusions Spending for health care varies significantly by age

group Per capita health spending increases steadily with age for most health care sectors

Young persons are spending a decreasing share of the health dollar because they are declining as a pershycent of the total population Private sources of payshyment provide most of the health expenses for the young

The middle age group spends most of the health care dollar because it is the largest age group Most health expenses for this group are paid by private sources

Persons aged 65 and over continue to increase steadily as a percent of the total population The health care needs of these persons shown by current use of various sectors of health care are expected to

HEALTH CARE FINANCING REVIEW SPRING 1980 79

grow along with their numbers resulting in an inshycreasing share of personal health care spending for and by the elderly Public financing has been and conshytinues to be the major source of funding for personal health care costs for the aged As the aged populashytion continues to grow in the future the need for public financing of health care costs is expected to increase especially for those types of care which aged persons use more oftenmdashhospital care physishycians services and nursing home care The populashytion within the age group 65 and over is aging and is expected to add to the need for health care services especially nursing home care Health care policy and financing must continue to cope with these trends which are expected to continue for many years to come

AcknowledgmentsThe author is indebted to Mary E Rieder Acting Director

of the Division of National Cost Estimates to members of the Division of National Cost Estimates and Intern Karen Young for their comments and suggestions and to Joanie Henderson and Ann Leake for secretarial assistance

Technical Note A

CONCEPTS AND DEFINITIONS

All estimates in this report relate to personal health care expendituresmdashthat portion of the total national health care expense representing health services and supplies received directly by individuals They make up total national expenditures for health together with spending for research and medical facilities conshystruction identifiable administrative costs of governshyment programs government public health activities expenses incurred by philanthropic organizations in raising funds for health care and the net costs of private health insurance (the difference between premiums and benefit payments)

All expenditures for health care that are channeled through any program established by public law are treated as public expenditures in these estimates Exshypenditures under workers compensation programs for example are included with government expenshyditures although they involve benefits paid by private insurers from premiums collected from private sources

Funds disbursed by public programs are reported as program expenditures even for example when they include significant private contributions made by beneficiaries as in the Supplementary Medical Inshysurance (SMI) program The benefit expenditures reported in this series are not adjusted to eliminate the duplication that exists when payments are made by State governments into the Medicare trust fund in the form of SMI premiums for public assistance and Supplemental Security Income (SSI) recipients and they are reported as Medicaid expenditures The amount paid by Medicaid as premiums in 1978 was $288 million for all beneficiaries that portion not reshytained in the trust fund is duplicated as a Medicare expense The amount does not noticeably affect the relationships that are reported

Health expenditures by State and local governshyments that involve funds received from the Federal government under revenue sharing are reported as State and local expenditures not as Federal expenshyditures These funds amounted to $232 million in the first half of fiscal year 1976 the latest period for which data are available No information is available on the use of such funds by specific programs

Responsibility for compiling estimates of national health care spending now resides with the Health Care Financing Administration (HCFA) Department of Health and Human Services Definitions of the various types of health care and descriptions of the public programs are contained in the various articles in the series carrying estimates for expenditures (Gibson 1979 Carroll 1979)

It should be noted that hospital care includes all exshypenditures for care in hospitalsmdashboth inpatient and outpatient The data cover all services and supplies provided

Population estimates used here are selected to corshyrespond to the population covered by expenditure estimates Since national health expenditures cover all spending for or by United States citizens and residents population estimates include the institushytionalized population the Armed Forces (both in the United States and overseas) Federal civilian employees overseas and the civilian population of outlying areas

The group under age 19 presents some problems in connection with the available demographic informashytion on utilization and expenditures Extensive intershypolation is often required to estimate certain types of expenditures for this group Because of the nature of some data sources expenses for certain persons under age 19 who are part of the labor force are not separable from those aged 19 to 64 and expenses of dependent children over age 18 are included with those of the younger group

Technical Note B

The Health Interview Survey (HIS) which provided the data for Table 2 continuously samples members of households It was not intended to obtain complete information on the deceased nor on the six percent of the aged population who are institutionalized Thus Table 2 tends to underestimate the volume of services used by the aged The degree of this underestimation can be evaluated by comparing the statistics in Table 2 to other data A 1973 study (the latest available) determined that six percent of the aged population is institutionalized in psychiatric and long-stay hospitals or nursing homes Institutionalized persons had more frequent admissions and a longer average length of stay than did the noninstitutionalized elderly [Deacon 1977] This study also determined that the institushytionalized elderly used 25 times more physician sershyvices and twice as many drug prescriptions per capita than did their noninstitutionalized counterparts Thus Table 2 significantly underestimates hospital use by the elderly

HEALTH CARE FINANCING REVIEWSPRING 1980 80

It is also necessary to evaluate peoples health exshypenditures in the year of their death to assess the underestimate of the values in Table 2 The Health Inshyterview Survey captures only about half of the health care use of persons dying in the survey year The following table presents the disproportionate share of Medicare dollars spent for aged persons who died in 1976

Technical Note C

Table A Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Years 197819771976 19701965

Table B Estimated Personal Health Care Expenshyditures under Public Programs by Type of Expenditure and Source of Funds for Three Age Groups for Calendar Years 19781977 1976 1970 1965

Table C Expenditures for Health Services and Supshyplies under Public Programs by Program for Three Age Groups for Calendar Years 1978 19771976 1970 1965

Table D Estimated Amount and Percentage Distribution of Personal Health Care Exshypenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 197819771976 1970 1965

Distribution of Medicare Expenditures for Persons Who Died in 1976

Percent of Medicare Percent of Total Recipients Who Died Medicare Dollars

Age Group in 1976 Spent for Those Recipients

All ages 65 and Over 79 207

65-69 40 15370-74 58 18575-79 80 20380-84 118 24985 and Over 198 321

Source Unpublished HCFA data

TABLE A

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1978

All Ages Under 19 19-64 65 and Over

Type of Expenditure Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate amount (in millions)

Total $167911 $102870 $65042 $19875 $14180 $5696 $98668 $70497 $28172 $49366 $18192 $31175

Hospital Care 76025 35107 40919 7070 3835 3235 47785 28626 19159 21169 2645 18524 PhysiciansServices 35250 25811 9439 5215 4382 833 21124 17808 3316 8910 3620 5290 Dentists Services 13300 12761 539 2780 2546 234 9137 8876 261 1383 1338 45 Other Professional Services 4275 3303 972 398 193 205 2787 2480 307 1090 631 459 Drugs and Drug Sundries 15098 13798 1300 2823 2650 173 9044 8419 625 3231 2728 503 Eyeglasses and Appliances 3879 3522 357 481 459 22 2793 2659 134 605 405 201 Nursing-Home Care 15751 7394 8358 68 1 67 3057 600 2457 12624 6790 5834 Other Health Services 4333 1175 3158 1040 113 927 2941 1028 1913 354 35 319

Per Capita Amount Total $75298 $46131 $29167 $28607 $20410 $8199 $76396 $54584 $21813 $202619 $74668 $127955

Hospital Care 34093 15743 18350 10176 5520 4656 36998 22164 14834 86886 10856 76030 PhysiciansServices 15808 11575 4233 7506 6307 1199 16356 13788 2567 36570 14858 21712 DentistsServices 5964 5723 242 4001 3665 337 7075 6872 202 5676 5492 185 Other Professional Services 1917 1481 436 573 278 295 2158 1920 238 4474 2590 1884 Drugs and Drug Sundries 6770 6187 583 4063 3814 249 7002 6519 484 13261 11197 2064 Eyeglasses and Appliances 1740 1579 160 692 661 32 2162 2059 104 2483 1662 825 Nursing-Home Care 7064 3316 3748 100 01 96 2367 465 1902 51814 27869 23945 Other Health Services 1943 527 1416 1497 163 1334 2277 796 1481 1453 144 1310

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 453 341 629 356 270 568 484 406 680 429 145 594 PhysiciansServices 210 251 145 262 309 146 214 253 118 180 199 170 Dentists Services 79 124 8 140 180 41 93 126 9 28 74 1 Other Professional Services 25 32 15 20 14 36 28 35 11 22 35 15 Drugs and Drug Sundries 90 134 20 142 187 30 92 119 22 65 150 16 Eyeglasses and Appliances 23 34 5 24 32 4 28 38 5 12 22 6 Nursing-Home Care 94 72 129 3 mdash 12 31 9 87 256 373 187 Other Health Services 26 11 49 52 8 163 30 15 68 7 2 10

8 1 HEALTH CARE FINANCING REVIEW SPRING 1980

FIGURE 2 Hospital Discharge Rate by Age and Sex Total and Those Attributable to Persons

with Chronic Conditions 1974 D

isch

arg

e

Rat

e pe

r 1

000

Popula

tion

300shy

281

240shy 235

211 204

180shy181

169 163

120shy106

93

60 shy66

75 80

39 29

7 8

0 -Female Male

Under 17

Female Male

17-44

Female | Male

45-64

Female] Male

65 and Over

AgeSex Group

Chronic Conditions

Total Conditions

7 0 HEALTH CARE FINANCING REVIEW SPRING 1980

Medicare

With the implementation of Medicare in 1966 short-stay hospital admission rates for persons aged 65 andover increased rapidly To isolate age-related biological factors from other factors in the use of medical services Figure 3 was developed The figure displays the proportion of the aged population which had at least some hospital expense paid by Medicare for the years 196719681969 and 1976 The effect of biological age-related factors underlying hospitalizashytion rates is approximated by the slopes of the lines which show an increase of about 31 percent for each year after age 66 Although the rate of use by all pershysons (Figure 3) did not change over the early period hospitalization rates for all aged persons under Medicare did increase The vertical distances betweenthe lines in Figure 3 represent changes in overall hospitalization rates and reflect factors other than age-related biological ones

Figure 4 indicates that the Medicare program made hospital care affordable to the elderly and that the resulting influx of the aged into hospitals temporarily displaced younger patients Following that initial surge Medicare admission rates stablilized at about 300 per 1000 beneficiaries from fiscal year 1969 through fiscal year 1971 after which admission rates increased at a rate of two percentage points per year Admission rates for persons under age 65 increased sharply in 1970 and again between 1972 and 1974 before stabilizing

Hospital stays involving some surgery for persons aged 65 and over also increased but at a different rate In the early period from 1965 to 1972 hospital discharges with surgery per 1000 Medicare beneficiaries increased at an annual rate of 18 pershycent From 1972 to 1976 this surgical rate increased 29 percent annually

Upward trends in hospitalization and surgical rates for the aged are also associated with a shift in physishycians Medicare charges for services performed outshyside the hospital to services performed in the hospital as shown in Table 5

Evidently this shift in physicians charges from out-of-hospital to in-hospital care is related to increasing hospitalization rates and surgical rates Physicians charges are generally higher for hospital visits than for out-of-hospital visits and average physicians surgical charges generally far exceed average chargesfor other types of service Both out-of-hospital visits to physicians and the number of hospital days used per capita by aged persons remained relatively stable during the period 1971 through 1977 Total physician

visits did not change significantly but inpatient visits and surgical services as a proportion of total visits inshycreased leading to a shift in physicians charges toward more expensive types of care

Medicaid Changes in the Medicaid program may also help exshy

plain the variation in admission rates shown in Figure 4 The Medicaid program formally begun in January 1966 is a joint State-Federal program in which States participate at their option Ail but two States joined the program between 1965 and 1970 Alaska joined in fiscal year 1973 Arizona is the only State without a Medicaid program The last major influx of Medicaid participants occurred in January 1970 when seven States joined the program

The number of persons under age 65 eligible for Medicaid due to disability increased significantly betshyween 1969 and 1970 These persons are extensive users of hospital care and their enrollment in Medicaid partially explains the increase in admission rates for persons under age 65 in 1970mdasha year in which admission rates for aged persons did not change

The Economic Stabilization Program

The resumption of increases in hospital admission rates for aged persons increasing surgical hospitalizations a shift of physicians charges toward care in the hospital and an increase in admission rates for persons under age 65 coincided with the start of the Economic Stabilization Program (ESP) in fiscal year 1972 For most of its effective life the ESP restricted increases in hospital costs per admission and physicians charges per procedure but did not restrict increases in hospital admissions or in total physicians services Since the ESP had no effective limitation on the volume of services one interpretashytion of the data is that hospitals and physicians responded to the ESP requirements by allowing hospital admission rates to increase

After the ESP ended in early 1974 overall admission rates seemed to stabilize although admission rates for aged persons continued to increase

Changes in the rate of surgical operations per capita paralleled changes in admission rates over the period 1967-1978 Surgical rates per capita increased at an annual rate of 18 percent from the year ending in June 1967 to 1971 they increased at an annual rate of 32 percent from 1971 through 1974 and have decelerated to an annual rate of increase of 21 pershycent since 1974 [AHA Panel Survey]

TABLE 5 Physicians Services Charges Under Medicare for Persons Aged 65 and Over for Selected Calendar

Years 1971-1977 (amounts in billions)1

1971 1972 1976 1977

Amount Percent Amount Percent Amount Percent Amount Percent

Allowed ChargesInpatient Hospital

Out-of-Hospital1

$28 16

12

1000 568

432

$30 17

13

1000 576

424

$50 30

20

1000 600

400

$59 36

23

1000 607

393

1 Excludes outpatient hospital billing for physicians services Source Current Medicare Surveys

HEALTH CARE FINANCING REVIEW SPRING 1980 71

FIGURE 3 Persons Hospitalized per 1000 Medicare Beneficiaries by Age

Calendar Years 19671968 1969 and 1976 P

erso

ns H

osp

italiz

ed

per

10

00 B

enefic

iaries

300

250

1976

1969

bull 1968

bull 1967

200

150

100 66 68 70 72 74 76

Age

78 80 82 84

7 2 HEALTH CARE FINANCING REVIEW SPRING 1980

FIGURE 4 Short-Stay Hospital Admission Rates for Selected Populations

Years Ending June 1967-78

350

Adm

issi

ons

per

100

0 P

opul

atio

n

330shy

310

290

250shy

170shy

150shy

130shy

110shy

Total Population

Persons Under Age 65

Medicare Admissions Age 65 and Over

1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978

HEALTH CARE FINANCING REVIEW SPRING 1980 7 3

The Cost of Living Council in its evaluation of the early part of the ESP program reported that controls on hospital charges shifted the burden of increasing hospital expenses toward cost reimbursement proshygrams such as Medicare and Medicaid and away fromcharge reimbursement payment mechanisms such as private insurance Because Medicare and Medicaid serve mainly the aged and children while charge reimshybursement serves many of the 19 to 64 age group the early ESP regulations tended to shift increasing hospital costs to the aged and those 18 and under This affected the age distribution of hospital care exshypenses

Channels of Payment

PUBLIC CHANNELS

Public funding of health care for all age groups has been shifting from State and local governments to the Federal government In 1965 the main sources of public financing of health care were State and local governments which provided over half of the $79 billion in public money spent for health care Most of these non-Federal public funds were spent for the mid-age group which comprised the largest proportion of persons in non-Federal government psychiatric hospitals By 1970 the State and local share of public health care spending had declined to 35 percent and

by 1978 the share was down to 29 percent The decline in the percentage of health care spending by State and local governments may be traced to two factors the growth of Federal programs which parshytially replaced State and local public assistance spending for medical care and the decrease in populashytions of State and local governmental psychiatric hospitals The Federal share of total public health care spending grew from 48 percent in 1965 to 71 pershycent in 1978 Between 1965 and 1978 inclusively the Federal share grew from 51 percent to 86 percent for the aged from 43 percent to 57 percent for the midshyage group and from 61 percent to 66 percent for pershysons under age 19 The distribution of total personal health spending in 1978 by age group and source of public payment is displayed in Figure 5

In 1965 the Veterans Administration the Departshyment of Defense and workers compensation also proshyvided health caremdashmainly for the mid-age group These programs spent $275 billion and accounted for 35 percent of all public spending in 1965 In 1978 they spent $116 billion but their share of public spending diminished to 17 percent reflecting the rapid growth in Medicare and Medicaid spending Public financing as a percent of all health care funding grew rapidly after the introduction of Medicare and Medicaid in 1966 but more recently appears to have stabilized for all age groups (Table 6) Although public funding of personal health care expenditures continues to grow State and local funding as a percent of total expenshyditures had declined

TABLE 6

Percentage Distribution of Funding for Personal Health Care for Selected Calendar Years 1965 to 1978

Age Group 1978 1977 1970 1970 1965

All Ages Total 1000 1000 1000 1000 1000

Private 613 610 609 659 789 Public 387 390 391 341 211

Federal 277 276 275 222 101 State and Local 110 114 116 120 110

Under age 19 Total 1000 1000 1000 1000 1000

Private 713 715 711 761 845 Public 287 285 285 239 155

Federal 189 187 193 142 94 State and Local 98 98 97 97 61

Ages 19-64 Total 1000 1000 1000 1000 1000

Private 714 712 711 754 808 Public 286 288 289 246 192

Federal 162 160 160 111 83 State and Local 124 128 128 135 110

Ages 65 and Over Total 1000 1000 1000 1000 1000

Private 368 361 355 388 701 Public 632 639 645 612 299

Federal 542 547 547 513 154 State and Local 89 92 98 99 144

HEALTH CARE FINANCING REVIEW SPRING 1980 74

FIGURE 5 Percentage Distribution of Personal Health Care Expenditures by Source of Funds and Age Group

Calendar Year 1978

$986 billion

72

$494 billion

37

9

$199 billion 12

54 71

16 10 19

Under 19 19-64 65 and over

Age Group

Private

State and Local Government

Federal Government

HEALTH CARE FINANCING REVIEW SPRING 1980 7 5

Medicare and Medicaid

Two-thirds of all public financing of health care is provided by Medicare and Medicaid Although Medicare finances health care primarily for aged pershysons Medicaid finances health care for all ages as shown by Table 7

TABLE 7 Percent of Total Personal Health Care

Expenditures Financed by Public Programs 1978

Age Group Medicare Medicaid Other

All ages 148 109 130 Under 19 2 158 127 19-64 32 87 167 65 and Over 441 134 57

Medicare In 1978 Medicare provided 44 percent of all health

care costs for the aged compared to 39 percent in 1970 Part of this increase can be attributed to the risshying proportion of hospital care funded by Medicare Medicare paid 71 percent of hospital care costs in 1970 and 75 percent in 1978 This increase was not due to explicit policy decisions It resulted from changes in the mix of psychiatric and non-psychiatric hospital care Between 1955 and 1978 the average daily census in psychiatric hospitals fell from 677000 patients to 190000 patients the age distribution of the average daily census remained fairly constant Consequently community hospital days grew as a share of total hospital days for the aged This increasshying proportion of more highly reimbursed care has caused the increase in the Medicare share of total hospital care for the aged

The proportion of physician expenses paid by Medicare also has increased This occurred because the Medicare annual deductible increased from $50 to $60 in 1973 but has not changed since despite rapid increases in allowed charges for physicians care Table 8 shows that from 1971 to 1977 the deductible expense for physicians services under Medicare decreased from about 19 percent to 12 percent of all allowed charges

TABLE 8 Physicians Services Percentage Distribution of Reimbursements Coinsurance and Deductibles

Selected Calendar Years 1971-1977

1977

Percent

Allowed Charges 1000

Reimbursement 707Coinsurance 177Deductible 116Source Unpublished HCFA data

Medicaid

Medicaid pays a significant part of hospital and physician care costs for persons under age 19 In 1977 about a fourth of all hospital spending and about one dollar of every eight spent for physician care for this group was financed by Medicaid (Table 9) Medicaid paid 39 percent of nursing home costs for persons aged 65 and over in 1978 It appears that the proportion of nursing home care costs paid by Medicaid and Medicare has been decreasing in recent years

In 1978 the program spent $86 billion for persons aged 19 to 64 which represented 47 percent of total Medicaid expenditures Two groups of Medicaid recishypients in this mid-age range accounted for most of these expenditures disabled persons under age 65 who comprised about one-ninth of all Medicaid recishypients but for whom about one-fifth of all Medicaid expenditures were made and adults in families with dependent children who comprised about one-fifth of all Medicaid recipients and for whom about one-sixth of all Medicaid expenditures were made

197(5 1972 1971

Percent Percent Percent

1000 1000 1000

688 175 127

655 164 181

650 162 188

THE INTERACTION OF PRIVATE AND PUBLIC CHANNELS

Direct or out-of-pocket payments and private inshysurance financed most health care costs for younger age groups while public monies dominated funding for aged persons Major channels of payment for all age groups in 1977 are shown in Table 9 by selected types of medical care

Hospitals were the major recipients of public and private funding for health care receiving 34 percent of private funds and 63 percent of public funds The changing structure of source of payment for hospital care is an important determinant of public and private health care funding policy Although no comprehenshysive survey of sources of payment for hospital care by age group is available data from various public and private sources may be merged to estimate the flow of funds by age group in the hospital industry Table 10 represents this flow of funds for the years 1970 and 1977 Medicare provided an increasing share of

HEALTH CARE FINANCING REVIEWSPRING 1980 76

FIGURE 6 Per Capita Personal Health Care Expenditures for the Aged

by Source of Funds and by Type of Care Calendar Year 1978

$2026

Private $746

Other Public $115|

Programs

Medicaid $271

$869

$109 $792

Medicaid $81

-$31

$490

Medicare $893

$366

$648 $149 $30

Medicare $3

-$11 $230

$2031

bull$42

Total Hospital Physicians All Other Care Services

HEALTH CARE FINANCING REVIEW SPRING 1980 7 7

TABLE 9

Percentage Distribution of Health Care Expenditures by Channels of Payment for Hospital Care Physicians Services and All Other Health Care Services Calendar Year 1977

Private Public

Private Direct Health

Age Group Total Total Payments Insurance Other Total Medicare Medicaid Other

All Personal Health Care All Ages 1000 610 318 279 13 390 146 112 132 Under 19 1000 715 381 327 7 285 1 156 128 19-64 1000 712 319 374 19 288 30 89 169 65 and Over 1000 361 291 66 4 639 442 138 59

Hospital Care All Ages 1000 456 83 362 11 544 239 95 210 Under 19 1000 546 37 507 2 454 mdash 250 204 19-64 1000 592 107 469 16 408 49 96 263 65 and Over 1000 120 46 71 3 880 747 39 94

Physician Care All Ages 1000 741 339 401 1 259 147 60 52 Under 19 1000 844 387 457 mdash 156 4 121 31 19-64 1000 845 357 486 1 155 24 56 75 65 and Over 1000 418 262 155 mdash 582 542 31 9

All Other Care All Ages 1000 739 625 90 24 261 19 167 75 Under 19 1000 785 702 69 15 215 - 92 123 19-64 1000 812 634 140 38 188 2 102 84 65 and Over 1000 606 580 19 7 394 53 299 42

community and related hospital spending and private insurance declined due to the extension of Medicare coverage to certain disabled persons under age 65

The proportion of hospital spending for the aged paid by Medicare decreased slightly over the period According to Medicare actuaries more than a million persons aged 65 and over are ineligible for hospital inshysurance under Medicare These persons are predominantly retired government employees whose private insurance continues at retirement and covers most of their physician and hospital care

DIRECT PAYMENTS BY PERSONS AGED 65 AND OVER

Out-of-pocket payments for health care continue to be a major expense for aged persons In 1977 pershysons aged 65 and over paid 29 percent of their health care costs out-of-pocket The amounts paid out-ofshypocket vary considerably by the type of care provided

The out-of-pocket liability of the elderly for hospital care has changed dramatically since 1965mdashthe year before Medicare and Medicaid began About 13 pershycent of spending for hospital care was paid out-ofshypocket in 1965 compared to less than five percent by 1977

The elderly make out-of-pocket payments for physishycians care for that part of the deductible and coinshysurance not paid by Medicaid or private insurance for physicians charges not allowed by Medicare but colshylectable from beneficiaries and for medical services not covered by Medicare Physicians billings to pashytients for charges denied by Medicare because the charges exceed the allowed amounts add a signifishycant amount to patients liabilities generally not covered by private insurance Through 1976 the percentage of total physicians charges paid by Medicare declined because of the growing obligations of Medicare beneficiaries for physicians charges on unassigned claims that were submitted by physishycians but disallowed These disallowed charges to beneficiaries increased from two percent of the total physician bill for the aged in fiscal year 1968 to about 10 percent in calendar year 1976 where they remained through 1978 In dollar terms these out-of-pocket exshypenses for physicians services were about $84 per capita in 1977 and preliminary estimates indicate that the costs will rise to about $96 per capita in 1978

Payment for nursing home care represents the largest health care liability for persons aged 65 and overmdashestimated at $271 per capita in 1978 up from $228 in 1977 and $109 in 1970 About 52 percent of nursing home care was financed out-of-pocket by beneficiaries in 1978

HEALTH CARE FINANCING REVIEW SPRING 1980 78

TABLE 10

Hospital Expenditures and Percentage Distribution of Channels of Payment by Type of Hospital and Age Group Calendar Years 1970 and 1977 (Dollar amounts In millions)

1977 1970

65 and 65 and Total Under 19 19-64 Over Total Under 19 19-64 Over

Psychiatric Hospitals (non-Federal) $4015 $199 $2632 $1184 $2534 $81 $1710 $744 State and Local Hospitals

Sources of Payment-Total 1000 100-0 1000 1000 1000 1000 1000 1000 Medicare 17 mdash 4 49 5 mdash mdash 16 Medicaid 187 347 153 236 110 37 5 359 Other Federal 15 70 15 5 15 99 15 5 Other State and Local 446 85 465 465 701 741 791 489 Private Health Insurance 140 412 180 6 10 37 12 1 Direct Payment 195 85 183 239 159 86 176 129

Private Hospitals $661 $33 $433 $195 $258 $8 $174 $76

Sources of Payment-Total 1000 1000 1000 1000 1000 1000_ 1000 1000 Medicare 17 - 5 46 35 mdash mdash 118 Other State and Local 11 30 12 5 19 mdash 29 mdash Private Health Insurance 700 848 774 508 481 375 483 487 Philanthropy 39 30 39 41 39 125 34 39 Direct Payments 234 91 171 400 426 500 454 355

Federal Hospitals $6099 $747 $4595 $757 $2822 $499 $2025 $349

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Veterans Administration 586 - 636 856 533 mdash 599 828 Department of Defense 322 631 312 83 380 835 328 92 Other 92 369 52 61 88 165 73 80

Other Hospitals $57139 $5572 $34806 $16761 $22184 $2901 $13397 $5885

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Medicare 282 1 60 838 223 mdash - 842 Medicaid 99 281 105 27 88 169 99 23 Workers Compensation 23 mdash 37 2 23 mdash 38 3 State and Local Public Assistance 7 3 11 2 9 11 11 2 Other State and Local 59 13 86 19 70 95 87 19 Department of Defense 7 18 9 1 11 30 11 1 Other Government Programs 15 66 10 6 9 23 10 1 Philanthropy 12 3 19 2 15 5 19 10 Private Health Insurance 412 576 548 76 444 588 585 54 Direct Payments 83 40 115 28 107 80 140 44

Payments for drugs and drug sundries and for denshytists services are another major expense Precise dollar amounts for these payments are not currently available although surveys now under way will proshyvide estimates of out-of-pocket expenses for these types of care as well as for other health services Out-of-pocket spending for drugs and dentists sershyvices is estimated at $150 per capita in 1977 and $160 in 1978

Medicare Supplementary Medical Insurance (SMI) and private health insurance premiums are also paid out-of-pocket at a rate of $78 per capita for SMI and $90 per capita for private health insurance Persons aged 65 and over paid an average of about $698 for health related services and items out-of-pocket in 1977mdashrepresenting 12 percent of their $5900 average income

Conclusions Spending for health care varies significantly by age

group Per capita health spending increases steadily with age for most health care sectors

Young persons are spending a decreasing share of the health dollar because they are declining as a pershycent of the total population Private sources of payshyment provide most of the health expenses for the young

The middle age group spends most of the health care dollar because it is the largest age group Most health expenses for this group are paid by private sources

Persons aged 65 and over continue to increase steadily as a percent of the total population The health care needs of these persons shown by current use of various sectors of health care are expected to

HEALTH CARE FINANCING REVIEW SPRING 1980 79

grow along with their numbers resulting in an inshycreasing share of personal health care spending for and by the elderly Public financing has been and conshytinues to be the major source of funding for personal health care costs for the aged As the aged populashytion continues to grow in the future the need for public financing of health care costs is expected to increase especially for those types of care which aged persons use more oftenmdashhospital care physishycians services and nursing home care The populashytion within the age group 65 and over is aging and is expected to add to the need for health care services especially nursing home care Health care policy and financing must continue to cope with these trends which are expected to continue for many years to come

AcknowledgmentsThe author is indebted to Mary E Rieder Acting Director

of the Division of National Cost Estimates to members of the Division of National Cost Estimates and Intern Karen Young for their comments and suggestions and to Joanie Henderson and Ann Leake for secretarial assistance

Technical Note A

CONCEPTS AND DEFINITIONS

All estimates in this report relate to personal health care expendituresmdashthat portion of the total national health care expense representing health services and supplies received directly by individuals They make up total national expenditures for health together with spending for research and medical facilities conshystruction identifiable administrative costs of governshyment programs government public health activities expenses incurred by philanthropic organizations in raising funds for health care and the net costs of private health insurance (the difference between premiums and benefit payments)

All expenditures for health care that are channeled through any program established by public law are treated as public expenditures in these estimates Exshypenditures under workers compensation programs for example are included with government expenshyditures although they involve benefits paid by private insurers from premiums collected from private sources

Funds disbursed by public programs are reported as program expenditures even for example when they include significant private contributions made by beneficiaries as in the Supplementary Medical Inshysurance (SMI) program The benefit expenditures reported in this series are not adjusted to eliminate the duplication that exists when payments are made by State governments into the Medicare trust fund in the form of SMI premiums for public assistance and Supplemental Security Income (SSI) recipients and they are reported as Medicaid expenditures The amount paid by Medicaid as premiums in 1978 was $288 million for all beneficiaries that portion not reshytained in the trust fund is duplicated as a Medicare expense The amount does not noticeably affect the relationships that are reported

Health expenditures by State and local governshyments that involve funds received from the Federal government under revenue sharing are reported as State and local expenditures not as Federal expenshyditures These funds amounted to $232 million in the first half of fiscal year 1976 the latest period for which data are available No information is available on the use of such funds by specific programs

Responsibility for compiling estimates of national health care spending now resides with the Health Care Financing Administration (HCFA) Department of Health and Human Services Definitions of the various types of health care and descriptions of the public programs are contained in the various articles in the series carrying estimates for expenditures (Gibson 1979 Carroll 1979)

It should be noted that hospital care includes all exshypenditures for care in hospitalsmdashboth inpatient and outpatient The data cover all services and supplies provided

Population estimates used here are selected to corshyrespond to the population covered by expenditure estimates Since national health expenditures cover all spending for or by United States citizens and residents population estimates include the institushytionalized population the Armed Forces (both in the United States and overseas) Federal civilian employees overseas and the civilian population of outlying areas

The group under age 19 presents some problems in connection with the available demographic informashytion on utilization and expenditures Extensive intershypolation is often required to estimate certain types of expenditures for this group Because of the nature of some data sources expenses for certain persons under age 19 who are part of the labor force are not separable from those aged 19 to 64 and expenses of dependent children over age 18 are included with those of the younger group

Technical Note B

The Health Interview Survey (HIS) which provided the data for Table 2 continuously samples members of households It was not intended to obtain complete information on the deceased nor on the six percent of the aged population who are institutionalized Thus Table 2 tends to underestimate the volume of services used by the aged The degree of this underestimation can be evaluated by comparing the statistics in Table 2 to other data A 1973 study (the latest available) determined that six percent of the aged population is institutionalized in psychiatric and long-stay hospitals or nursing homes Institutionalized persons had more frequent admissions and a longer average length of stay than did the noninstitutionalized elderly [Deacon 1977] This study also determined that the institushytionalized elderly used 25 times more physician sershyvices and twice as many drug prescriptions per capita than did their noninstitutionalized counterparts Thus Table 2 significantly underestimates hospital use by the elderly

HEALTH CARE FINANCING REVIEWSPRING 1980 80

It is also necessary to evaluate peoples health exshypenditures in the year of their death to assess the underestimate of the values in Table 2 The Health Inshyterview Survey captures only about half of the health care use of persons dying in the survey year The following table presents the disproportionate share of Medicare dollars spent for aged persons who died in 1976

Technical Note C

Table A Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Years 197819771976 19701965

Table B Estimated Personal Health Care Expenshyditures under Public Programs by Type of Expenditure and Source of Funds for Three Age Groups for Calendar Years 19781977 1976 1970 1965

Table C Expenditures for Health Services and Supshyplies under Public Programs by Program for Three Age Groups for Calendar Years 1978 19771976 1970 1965

Table D Estimated Amount and Percentage Distribution of Personal Health Care Exshypenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 197819771976 1970 1965

Distribution of Medicare Expenditures for Persons Who Died in 1976

Percent of Medicare Percent of Total Recipients Who Died Medicare Dollars

Age Group in 1976 Spent for Those Recipients

All ages 65 and Over 79 207

65-69 40 15370-74 58 18575-79 80 20380-84 118 24985 and Over 198 321

Source Unpublished HCFA data

TABLE A

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1978

All Ages Under 19 19-64 65 and Over

Type of Expenditure Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate amount (in millions)

Total $167911 $102870 $65042 $19875 $14180 $5696 $98668 $70497 $28172 $49366 $18192 $31175

Hospital Care 76025 35107 40919 7070 3835 3235 47785 28626 19159 21169 2645 18524 PhysiciansServices 35250 25811 9439 5215 4382 833 21124 17808 3316 8910 3620 5290 Dentists Services 13300 12761 539 2780 2546 234 9137 8876 261 1383 1338 45 Other Professional Services 4275 3303 972 398 193 205 2787 2480 307 1090 631 459 Drugs and Drug Sundries 15098 13798 1300 2823 2650 173 9044 8419 625 3231 2728 503 Eyeglasses and Appliances 3879 3522 357 481 459 22 2793 2659 134 605 405 201 Nursing-Home Care 15751 7394 8358 68 1 67 3057 600 2457 12624 6790 5834 Other Health Services 4333 1175 3158 1040 113 927 2941 1028 1913 354 35 319

Per Capita Amount Total $75298 $46131 $29167 $28607 $20410 $8199 $76396 $54584 $21813 $202619 $74668 $127955

Hospital Care 34093 15743 18350 10176 5520 4656 36998 22164 14834 86886 10856 76030 PhysiciansServices 15808 11575 4233 7506 6307 1199 16356 13788 2567 36570 14858 21712 DentistsServices 5964 5723 242 4001 3665 337 7075 6872 202 5676 5492 185 Other Professional Services 1917 1481 436 573 278 295 2158 1920 238 4474 2590 1884 Drugs and Drug Sundries 6770 6187 583 4063 3814 249 7002 6519 484 13261 11197 2064 Eyeglasses and Appliances 1740 1579 160 692 661 32 2162 2059 104 2483 1662 825 Nursing-Home Care 7064 3316 3748 100 01 96 2367 465 1902 51814 27869 23945 Other Health Services 1943 527 1416 1497 163 1334 2277 796 1481 1453 144 1310

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 453 341 629 356 270 568 484 406 680 429 145 594 PhysiciansServices 210 251 145 262 309 146 214 253 118 180 199 170 Dentists Services 79 124 8 140 180 41 93 126 9 28 74 1 Other Professional Services 25 32 15 20 14 36 28 35 11 22 35 15 Drugs and Drug Sundries 90 134 20 142 187 30 92 119 22 65 150 16 Eyeglasses and Appliances 23 34 5 24 32 4 28 38 5 12 22 6 Nursing-Home Care 94 72 129 3 mdash 12 31 9 87 256 373 187 Other Health Services 26 11 49 52 8 163 30 15 68 7 2 10

8 1 HEALTH CARE FINANCING REVIEW SPRING 1980

Medicare

With the implementation of Medicare in 1966 short-stay hospital admission rates for persons aged 65 andover increased rapidly To isolate age-related biological factors from other factors in the use of medical services Figure 3 was developed The figure displays the proportion of the aged population which had at least some hospital expense paid by Medicare for the years 196719681969 and 1976 The effect of biological age-related factors underlying hospitalizashytion rates is approximated by the slopes of the lines which show an increase of about 31 percent for each year after age 66 Although the rate of use by all pershysons (Figure 3) did not change over the early period hospitalization rates for all aged persons under Medicare did increase The vertical distances betweenthe lines in Figure 3 represent changes in overall hospitalization rates and reflect factors other than age-related biological ones

Figure 4 indicates that the Medicare program made hospital care affordable to the elderly and that the resulting influx of the aged into hospitals temporarily displaced younger patients Following that initial surge Medicare admission rates stablilized at about 300 per 1000 beneficiaries from fiscal year 1969 through fiscal year 1971 after which admission rates increased at a rate of two percentage points per year Admission rates for persons under age 65 increased sharply in 1970 and again between 1972 and 1974 before stabilizing

Hospital stays involving some surgery for persons aged 65 and over also increased but at a different rate In the early period from 1965 to 1972 hospital discharges with surgery per 1000 Medicare beneficiaries increased at an annual rate of 18 pershycent From 1972 to 1976 this surgical rate increased 29 percent annually

Upward trends in hospitalization and surgical rates for the aged are also associated with a shift in physishycians Medicare charges for services performed outshyside the hospital to services performed in the hospital as shown in Table 5

Evidently this shift in physicians charges from out-of-hospital to in-hospital care is related to increasing hospitalization rates and surgical rates Physicians charges are generally higher for hospital visits than for out-of-hospital visits and average physicians surgical charges generally far exceed average chargesfor other types of service Both out-of-hospital visits to physicians and the number of hospital days used per capita by aged persons remained relatively stable during the period 1971 through 1977 Total physician

visits did not change significantly but inpatient visits and surgical services as a proportion of total visits inshycreased leading to a shift in physicians charges toward more expensive types of care

Medicaid Changes in the Medicaid program may also help exshy

plain the variation in admission rates shown in Figure 4 The Medicaid program formally begun in January 1966 is a joint State-Federal program in which States participate at their option Ail but two States joined the program between 1965 and 1970 Alaska joined in fiscal year 1973 Arizona is the only State without a Medicaid program The last major influx of Medicaid participants occurred in January 1970 when seven States joined the program

The number of persons under age 65 eligible for Medicaid due to disability increased significantly betshyween 1969 and 1970 These persons are extensive users of hospital care and their enrollment in Medicaid partially explains the increase in admission rates for persons under age 65 in 1970mdasha year in which admission rates for aged persons did not change

The Economic Stabilization Program

The resumption of increases in hospital admission rates for aged persons increasing surgical hospitalizations a shift of physicians charges toward care in the hospital and an increase in admission rates for persons under age 65 coincided with the start of the Economic Stabilization Program (ESP) in fiscal year 1972 For most of its effective life the ESP restricted increases in hospital costs per admission and physicians charges per procedure but did not restrict increases in hospital admissions or in total physicians services Since the ESP had no effective limitation on the volume of services one interpretashytion of the data is that hospitals and physicians responded to the ESP requirements by allowing hospital admission rates to increase

After the ESP ended in early 1974 overall admission rates seemed to stabilize although admission rates for aged persons continued to increase

Changes in the rate of surgical operations per capita paralleled changes in admission rates over the period 1967-1978 Surgical rates per capita increased at an annual rate of 18 percent from the year ending in June 1967 to 1971 they increased at an annual rate of 32 percent from 1971 through 1974 and have decelerated to an annual rate of increase of 21 pershycent since 1974 [AHA Panel Survey]

TABLE 5 Physicians Services Charges Under Medicare for Persons Aged 65 and Over for Selected Calendar

Years 1971-1977 (amounts in billions)1

1971 1972 1976 1977

Amount Percent Amount Percent Amount Percent Amount Percent

Allowed ChargesInpatient Hospital

Out-of-Hospital1

$28 16

12

1000 568

432

$30 17

13

1000 576

424

$50 30

20

1000 600

400

$59 36

23

1000 607

393

1 Excludes outpatient hospital billing for physicians services Source Current Medicare Surveys

HEALTH CARE FINANCING REVIEW SPRING 1980 71

FIGURE 3 Persons Hospitalized per 1000 Medicare Beneficiaries by Age

Calendar Years 19671968 1969 and 1976 P

erso

ns H

osp

italiz

ed

per

10

00 B

enefic

iaries

300

250

1976

1969

bull 1968

bull 1967

200

150

100 66 68 70 72 74 76

Age

78 80 82 84

7 2 HEALTH CARE FINANCING REVIEW SPRING 1980

FIGURE 4 Short-Stay Hospital Admission Rates for Selected Populations

Years Ending June 1967-78

350

Adm

issi

ons

per

100

0 P

opul

atio

n

330shy

310

290

250shy

170shy

150shy

130shy

110shy

Total Population

Persons Under Age 65

Medicare Admissions Age 65 and Over

1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978

HEALTH CARE FINANCING REVIEW SPRING 1980 7 3

The Cost of Living Council in its evaluation of the early part of the ESP program reported that controls on hospital charges shifted the burden of increasing hospital expenses toward cost reimbursement proshygrams such as Medicare and Medicaid and away fromcharge reimbursement payment mechanisms such as private insurance Because Medicare and Medicaid serve mainly the aged and children while charge reimshybursement serves many of the 19 to 64 age group the early ESP regulations tended to shift increasing hospital costs to the aged and those 18 and under This affected the age distribution of hospital care exshypenses

Channels of Payment

PUBLIC CHANNELS

Public funding of health care for all age groups has been shifting from State and local governments to the Federal government In 1965 the main sources of public financing of health care were State and local governments which provided over half of the $79 billion in public money spent for health care Most of these non-Federal public funds were spent for the mid-age group which comprised the largest proportion of persons in non-Federal government psychiatric hospitals By 1970 the State and local share of public health care spending had declined to 35 percent and

by 1978 the share was down to 29 percent The decline in the percentage of health care spending by State and local governments may be traced to two factors the growth of Federal programs which parshytially replaced State and local public assistance spending for medical care and the decrease in populashytions of State and local governmental psychiatric hospitals The Federal share of total public health care spending grew from 48 percent in 1965 to 71 pershycent in 1978 Between 1965 and 1978 inclusively the Federal share grew from 51 percent to 86 percent for the aged from 43 percent to 57 percent for the midshyage group and from 61 percent to 66 percent for pershysons under age 19 The distribution of total personal health spending in 1978 by age group and source of public payment is displayed in Figure 5

In 1965 the Veterans Administration the Departshyment of Defense and workers compensation also proshyvided health caremdashmainly for the mid-age group These programs spent $275 billion and accounted for 35 percent of all public spending in 1965 In 1978 they spent $116 billion but their share of public spending diminished to 17 percent reflecting the rapid growth in Medicare and Medicaid spending Public financing as a percent of all health care funding grew rapidly after the introduction of Medicare and Medicaid in 1966 but more recently appears to have stabilized for all age groups (Table 6) Although public funding of personal health care expenditures continues to grow State and local funding as a percent of total expenshyditures had declined

TABLE 6

Percentage Distribution of Funding for Personal Health Care for Selected Calendar Years 1965 to 1978

Age Group 1978 1977 1970 1970 1965

All Ages Total 1000 1000 1000 1000 1000

Private 613 610 609 659 789 Public 387 390 391 341 211

Federal 277 276 275 222 101 State and Local 110 114 116 120 110

Under age 19 Total 1000 1000 1000 1000 1000

Private 713 715 711 761 845 Public 287 285 285 239 155

Federal 189 187 193 142 94 State and Local 98 98 97 97 61

Ages 19-64 Total 1000 1000 1000 1000 1000

Private 714 712 711 754 808 Public 286 288 289 246 192

Federal 162 160 160 111 83 State and Local 124 128 128 135 110

Ages 65 and Over Total 1000 1000 1000 1000 1000

Private 368 361 355 388 701 Public 632 639 645 612 299

Federal 542 547 547 513 154 State and Local 89 92 98 99 144

HEALTH CARE FINANCING REVIEW SPRING 1980 74

FIGURE 5 Percentage Distribution of Personal Health Care Expenditures by Source of Funds and Age Group

Calendar Year 1978

$986 billion

72

$494 billion

37

9

$199 billion 12

54 71

16 10 19

Under 19 19-64 65 and over

Age Group

Private

State and Local Government

Federal Government

HEALTH CARE FINANCING REVIEW SPRING 1980 7 5

Medicare and Medicaid

Two-thirds of all public financing of health care is provided by Medicare and Medicaid Although Medicare finances health care primarily for aged pershysons Medicaid finances health care for all ages as shown by Table 7

TABLE 7 Percent of Total Personal Health Care

Expenditures Financed by Public Programs 1978

Age Group Medicare Medicaid Other

All ages 148 109 130 Under 19 2 158 127 19-64 32 87 167 65 and Over 441 134 57

Medicare In 1978 Medicare provided 44 percent of all health

care costs for the aged compared to 39 percent in 1970 Part of this increase can be attributed to the risshying proportion of hospital care funded by Medicare Medicare paid 71 percent of hospital care costs in 1970 and 75 percent in 1978 This increase was not due to explicit policy decisions It resulted from changes in the mix of psychiatric and non-psychiatric hospital care Between 1955 and 1978 the average daily census in psychiatric hospitals fell from 677000 patients to 190000 patients the age distribution of the average daily census remained fairly constant Consequently community hospital days grew as a share of total hospital days for the aged This increasshying proportion of more highly reimbursed care has caused the increase in the Medicare share of total hospital care for the aged

The proportion of physician expenses paid by Medicare also has increased This occurred because the Medicare annual deductible increased from $50 to $60 in 1973 but has not changed since despite rapid increases in allowed charges for physicians care Table 8 shows that from 1971 to 1977 the deductible expense for physicians services under Medicare decreased from about 19 percent to 12 percent of all allowed charges

TABLE 8 Physicians Services Percentage Distribution of Reimbursements Coinsurance and Deductibles

Selected Calendar Years 1971-1977

1977

Percent

Allowed Charges 1000

Reimbursement 707Coinsurance 177Deductible 116Source Unpublished HCFA data

Medicaid

Medicaid pays a significant part of hospital and physician care costs for persons under age 19 In 1977 about a fourth of all hospital spending and about one dollar of every eight spent for physician care for this group was financed by Medicaid (Table 9) Medicaid paid 39 percent of nursing home costs for persons aged 65 and over in 1978 It appears that the proportion of nursing home care costs paid by Medicaid and Medicare has been decreasing in recent years

In 1978 the program spent $86 billion for persons aged 19 to 64 which represented 47 percent of total Medicaid expenditures Two groups of Medicaid recishypients in this mid-age range accounted for most of these expenditures disabled persons under age 65 who comprised about one-ninth of all Medicaid recishypients but for whom about one-fifth of all Medicaid expenditures were made and adults in families with dependent children who comprised about one-fifth of all Medicaid recipients and for whom about one-sixth of all Medicaid expenditures were made

197(5 1972 1971

Percent Percent Percent

1000 1000 1000

688 175 127

655 164 181

650 162 188

THE INTERACTION OF PRIVATE AND PUBLIC CHANNELS

Direct or out-of-pocket payments and private inshysurance financed most health care costs for younger age groups while public monies dominated funding for aged persons Major channels of payment for all age groups in 1977 are shown in Table 9 by selected types of medical care

Hospitals were the major recipients of public and private funding for health care receiving 34 percent of private funds and 63 percent of public funds The changing structure of source of payment for hospital care is an important determinant of public and private health care funding policy Although no comprehenshysive survey of sources of payment for hospital care by age group is available data from various public and private sources may be merged to estimate the flow of funds by age group in the hospital industry Table 10 represents this flow of funds for the years 1970 and 1977 Medicare provided an increasing share of

HEALTH CARE FINANCING REVIEWSPRING 1980 76

FIGURE 6 Per Capita Personal Health Care Expenditures for the Aged

by Source of Funds and by Type of Care Calendar Year 1978

$2026

Private $746

Other Public $115|

Programs

Medicaid $271

$869

$109 $792

Medicaid $81

-$31

$490

Medicare $893

$366

$648 $149 $30

Medicare $3

-$11 $230

$2031

bull$42

Total Hospital Physicians All Other Care Services

HEALTH CARE FINANCING REVIEW SPRING 1980 7 7

TABLE 9

Percentage Distribution of Health Care Expenditures by Channels of Payment for Hospital Care Physicians Services and All Other Health Care Services Calendar Year 1977

Private Public

Private Direct Health

Age Group Total Total Payments Insurance Other Total Medicare Medicaid Other

All Personal Health Care All Ages 1000 610 318 279 13 390 146 112 132 Under 19 1000 715 381 327 7 285 1 156 128 19-64 1000 712 319 374 19 288 30 89 169 65 and Over 1000 361 291 66 4 639 442 138 59

Hospital Care All Ages 1000 456 83 362 11 544 239 95 210 Under 19 1000 546 37 507 2 454 mdash 250 204 19-64 1000 592 107 469 16 408 49 96 263 65 and Over 1000 120 46 71 3 880 747 39 94

Physician Care All Ages 1000 741 339 401 1 259 147 60 52 Under 19 1000 844 387 457 mdash 156 4 121 31 19-64 1000 845 357 486 1 155 24 56 75 65 and Over 1000 418 262 155 mdash 582 542 31 9

All Other Care All Ages 1000 739 625 90 24 261 19 167 75 Under 19 1000 785 702 69 15 215 - 92 123 19-64 1000 812 634 140 38 188 2 102 84 65 and Over 1000 606 580 19 7 394 53 299 42

community and related hospital spending and private insurance declined due to the extension of Medicare coverage to certain disabled persons under age 65

The proportion of hospital spending for the aged paid by Medicare decreased slightly over the period According to Medicare actuaries more than a million persons aged 65 and over are ineligible for hospital inshysurance under Medicare These persons are predominantly retired government employees whose private insurance continues at retirement and covers most of their physician and hospital care

DIRECT PAYMENTS BY PERSONS AGED 65 AND OVER

Out-of-pocket payments for health care continue to be a major expense for aged persons In 1977 pershysons aged 65 and over paid 29 percent of their health care costs out-of-pocket The amounts paid out-ofshypocket vary considerably by the type of care provided

The out-of-pocket liability of the elderly for hospital care has changed dramatically since 1965mdashthe year before Medicare and Medicaid began About 13 pershycent of spending for hospital care was paid out-ofshypocket in 1965 compared to less than five percent by 1977

The elderly make out-of-pocket payments for physishycians care for that part of the deductible and coinshysurance not paid by Medicaid or private insurance for physicians charges not allowed by Medicare but colshylectable from beneficiaries and for medical services not covered by Medicare Physicians billings to pashytients for charges denied by Medicare because the charges exceed the allowed amounts add a signifishycant amount to patients liabilities generally not covered by private insurance Through 1976 the percentage of total physicians charges paid by Medicare declined because of the growing obligations of Medicare beneficiaries for physicians charges on unassigned claims that were submitted by physishycians but disallowed These disallowed charges to beneficiaries increased from two percent of the total physician bill for the aged in fiscal year 1968 to about 10 percent in calendar year 1976 where they remained through 1978 In dollar terms these out-of-pocket exshypenses for physicians services were about $84 per capita in 1977 and preliminary estimates indicate that the costs will rise to about $96 per capita in 1978

Payment for nursing home care represents the largest health care liability for persons aged 65 and overmdashestimated at $271 per capita in 1978 up from $228 in 1977 and $109 in 1970 About 52 percent of nursing home care was financed out-of-pocket by beneficiaries in 1978

HEALTH CARE FINANCING REVIEW SPRING 1980 78

TABLE 10

Hospital Expenditures and Percentage Distribution of Channels of Payment by Type of Hospital and Age Group Calendar Years 1970 and 1977 (Dollar amounts In millions)

1977 1970

65 and 65 and Total Under 19 19-64 Over Total Under 19 19-64 Over

Psychiatric Hospitals (non-Federal) $4015 $199 $2632 $1184 $2534 $81 $1710 $744 State and Local Hospitals

Sources of Payment-Total 1000 100-0 1000 1000 1000 1000 1000 1000 Medicare 17 mdash 4 49 5 mdash mdash 16 Medicaid 187 347 153 236 110 37 5 359 Other Federal 15 70 15 5 15 99 15 5 Other State and Local 446 85 465 465 701 741 791 489 Private Health Insurance 140 412 180 6 10 37 12 1 Direct Payment 195 85 183 239 159 86 176 129

Private Hospitals $661 $33 $433 $195 $258 $8 $174 $76

Sources of Payment-Total 1000 1000 1000 1000 1000 1000_ 1000 1000 Medicare 17 - 5 46 35 mdash mdash 118 Other State and Local 11 30 12 5 19 mdash 29 mdash Private Health Insurance 700 848 774 508 481 375 483 487 Philanthropy 39 30 39 41 39 125 34 39 Direct Payments 234 91 171 400 426 500 454 355

Federal Hospitals $6099 $747 $4595 $757 $2822 $499 $2025 $349

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Veterans Administration 586 - 636 856 533 mdash 599 828 Department of Defense 322 631 312 83 380 835 328 92 Other 92 369 52 61 88 165 73 80

Other Hospitals $57139 $5572 $34806 $16761 $22184 $2901 $13397 $5885

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Medicare 282 1 60 838 223 mdash - 842 Medicaid 99 281 105 27 88 169 99 23 Workers Compensation 23 mdash 37 2 23 mdash 38 3 State and Local Public Assistance 7 3 11 2 9 11 11 2 Other State and Local 59 13 86 19 70 95 87 19 Department of Defense 7 18 9 1 11 30 11 1 Other Government Programs 15 66 10 6 9 23 10 1 Philanthropy 12 3 19 2 15 5 19 10 Private Health Insurance 412 576 548 76 444 588 585 54 Direct Payments 83 40 115 28 107 80 140 44

Payments for drugs and drug sundries and for denshytists services are another major expense Precise dollar amounts for these payments are not currently available although surveys now under way will proshyvide estimates of out-of-pocket expenses for these types of care as well as for other health services Out-of-pocket spending for drugs and dentists sershyvices is estimated at $150 per capita in 1977 and $160 in 1978

Medicare Supplementary Medical Insurance (SMI) and private health insurance premiums are also paid out-of-pocket at a rate of $78 per capita for SMI and $90 per capita for private health insurance Persons aged 65 and over paid an average of about $698 for health related services and items out-of-pocket in 1977mdashrepresenting 12 percent of their $5900 average income

Conclusions Spending for health care varies significantly by age

group Per capita health spending increases steadily with age for most health care sectors

Young persons are spending a decreasing share of the health dollar because they are declining as a pershycent of the total population Private sources of payshyment provide most of the health expenses for the young

The middle age group spends most of the health care dollar because it is the largest age group Most health expenses for this group are paid by private sources

Persons aged 65 and over continue to increase steadily as a percent of the total population The health care needs of these persons shown by current use of various sectors of health care are expected to

HEALTH CARE FINANCING REVIEW SPRING 1980 79

grow along with their numbers resulting in an inshycreasing share of personal health care spending for and by the elderly Public financing has been and conshytinues to be the major source of funding for personal health care costs for the aged As the aged populashytion continues to grow in the future the need for public financing of health care costs is expected to increase especially for those types of care which aged persons use more oftenmdashhospital care physishycians services and nursing home care The populashytion within the age group 65 and over is aging and is expected to add to the need for health care services especially nursing home care Health care policy and financing must continue to cope with these trends which are expected to continue for many years to come

AcknowledgmentsThe author is indebted to Mary E Rieder Acting Director

of the Division of National Cost Estimates to members of the Division of National Cost Estimates and Intern Karen Young for their comments and suggestions and to Joanie Henderson and Ann Leake for secretarial assistance

Technical Note A

CONCEPTS AND DEFINITIONS

All estimates in this report relate to personal health care expendituresmdashthat portion of the total national health care expense representing health services and supplies received directly by individuals They make up total national expenditures for health together with spending for research and medical facilities conshystruction identifiable administrative costs of governshyment programs government public health activities expenses incurred by philanthropic organizations in raising funds for health care and the net costs of private health insurance (the difference between premiums and benefit payments)

All expenditures for health care that are channeled through any program established by public law are treated as public expenditures in these estimates Exshypenditures under workers compensation programs for example are included with government expenshyditures although they involve benefits paid by private insurers from premiums collected from private sources

Funds disbursed by public programs are reported as program expenditures even for example when they include significant private contributions made by beneficiaries as in the Supplementary Medical Inshysurance (SMI) program The benefit expenditures reported in this series are not adjusted to eliminate the duplication that exists when payments are made by State governments into the Medicare trust fund in the form of SMI premiums for public assistance and Supplemental Security Income (SSI) recipients and they are reported as Medicaid expenditures The amount paid by Medicaid as premiums in 1978 was $288 million for all beneficiaries that portion not reshytained in the trust fund is duplicated as a Medicare expense The amount does not noticeably affect the relationships that are reported

Health expenditures by State and local governshyments that involve funds received from the Federal government under revenue sharing are reported as State and local expenditures not as Federal expenshyditures These funds amounted to $232 million in the first half of fiscal year 1976 the latest period for which data are available No information is available on the use of such funds by specific programs

Responsibility for compiling estimates of national health care spending now resides with the Health Care Financing Administration (HCFA) Department of Health and Human Services Definitions of the various types of health care and descriptions of the public programs are contained in the various articles in the series carrying estimates for expenditures (Gibson 1979 Carroll 1979)

It should be noted that hospital care includes all exshypenditures for care in hospitalsmdashboth inpatient and outpatient The data cover all services and supplies provided

Population estimates used here are selected to corshyrespond to the population covered by expenditure estimates Since national health expenditures cover all spending for or by United States citizens and residents population estimates include the institushytionalized population the Armed Forces (both in the United States and overseas) Federal civilian employees overseas and the civilian population of outlying areas

The group under age 19 presents some problems in connection with the available demographic informashytion on utilization and expenditures Extensive intershypolation is often required to estimate certain types of expenditures for this group Because of the nature of some data sources expenses for certain persons under age 19 who are part of the labor force are not separable from those aged 19 to 64 and expenses of dependent children over age 18 are included with those of the younger group

Technical Note B

The Health Interview Survey (HIS) which provided the data for Table 2 continuously samples members of households It was not intended to obtain complete information on the deceased nor on the six percent of the aged population who are institutionalized Thus Table 2 tends to underestimate the volume of services used by the aged The degree of this underestimation can be evaluated by comparing the statistics in Table 2 to other data A 1973 study (the latest available) determined that six percent of the aged population is institutionalized in psychiatric and long-stay hospitals or nursing homes Institutionalized persons had more frequent admissions and a longer average length of stay than did the noninstitutionalized elderly [Deacon 1977] This study also determined that the institushytionalized elderly used 25 times more physician sershyvices and twice as many drug prescriptions per capita than did their noninstitutionalized counterparts Thus Table 2 significantly underestimates hospital use by the elderly

HEALTH CARE FINANCING REVIEWSPRING 1980 80

It is also necessary to evaluate peoples health exshypenditures in the year of their death to assess the underestimate of the values in Table 2 The Health Inshyterview Survey captures only about half of the health care use of persons dying in the survey year The following table presents the disproportionate share of Medicare dollars spent for aged persons who died in 1976

Technical Note C

Table A Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Years 197819771976 19701965

Table B Estimated Personal Health Care Expenshyditures under Public Programs by Type of Expenditure and Source of Funds for Three Age Groups for Calendar Years 19781977 1976 1970 1965

Table C Expenditures for Health Services and Supshyplies under Public Programs by Program for Three Age Groups for Calendar Years 1978 19771976 1970 1965

Table D Estimated Amount and Percentage Distribution of Personal Health Care Exshypenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 197819771976 1970 1965

Distribution of Medicare Expenditures for Persons Who Died in 1976

Percent of Medicare Percent of Total Recipients Who Died Medicare Dollars

Age Group in 1976 Spent for Those Recipients

All ages 65 and Over 79 207

65-69 40 15370-74 58 18575-79 80 20380-84 118 24985 and Over 198 321

Source Unpublished HCFA data

TABLE A

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1978

All Ages Under 19 19-64 65 and Over

Type of Expenditure Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate amount (in millions)

Total $167911 $102870 $65042 $19875 $14180 $5696 $98668 $70497 $28172 $49366 $18192 $31175

Hospital Care 76025 35107 40919 7070 3835 3235 47785 28626 19159 21169 2645 18524 PhysiciansServices 35250 25811 9439 5215 4382 833 21124 17808 3316 8910 3620 5290 Dentists Services 13300 12761 539 2780 2546 234 9137 8876 261 1383 1338 45 Other Professional Services 4275 3303 972 398 193 205 2787 2480 307 1090 631 459 Drugs and Drug Sundries 15098 13798 1300 2823 2650 173 9044 8419 625 3231 2728 503 Eyeglasses and Appliances 3879 3522 357 481 459 22 2793 2659 134 605 405 201 Nursing-Home Care 15751 7394 8358 68 1 67 3057 600 2457 12624 6790 5834 Other Health Services 4333 1175 3158 1040 113 927 2941 1028 1913 354 35 319

Per Capita Amount Total $75298 $46131 $29167 $28607 $20410 $8199 $76396 $54584 $21813 $202619 $74668 $127955

Hospital Care 34093 15743 18350 10176 5520 4656 36998 22164 14834 86886 10856 76030 PhysiciansServices 15808 11575 4233 7506 6307 1199 16356 13788 2567 36570 14858 21712 DentistsServices 5964 5723 242 4001 3665 337 7075 6872 202 5676 5492 185 Other Professional Services 1917 1481 436 573 278 295 2158 1920 238 4474 2590 1884 Drugs and Drug Sundries 6770 6187 583 4063 3814 249 7002 6519 484 13261 11197 2064 Eyeglasses and Appliances 1740 1579 160 692 661 32 2162 2059 104 2483 1662 825 Nursing-Home Care 7064 3316 3748 100 01 96 2367 465 1902 51814 27869 23945 Other Health Services 1943 527 1416 1497 163 1334 2277 796 1481 1453 144 1310

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 453 341 629 356 270 568 484 406 680 429 145 594 PhysiciansServices 210 251 145 262 309 146 214 253 118 180 199 170 Dentists Services 79 124 8 140 180 41 93 126 9 28 74 1 Other Professional Services 25 32 15 20 14 36 28 35 11 22 35 15 Drugs and Drug Sundries 90 134 20 142 187 30 92 119 22 65 150 16 Eyeglasses and Appliances 23 34 5 24 32 4 28 38 5 12 22 6 Nursing-Home Care 94 72 129 3 mdash 12 31 9 87 256 373 187 Other Health Services 26 11 49 52 8 163 30 15 68 7 2 10

8 1 HEALTH CARE FINANCING REVIEW SPRING 1980

FIGURE 3 Persons Hospitalized per 1000 Medicare Beneficiaries by Age

Calendar Years 19671968 1969 and 1976 P

erso

ns H

osp

italiz

ed

per

10

00 B

enefic

iaries

300

250

1976

1969

bull 1968

bull 1967

200

150

100 66 68 70 72 74 76

Age

78 80 82 84

7 2 HEALTH CARE FINANCING REVIEW SPRING 1980

FIGURE 4 Short-Stay Hospital Admission Rates for Selected Populations

Years Ending June 1967-78

350

Adm

issi

ons

per

100

0 P

opul

atio

n

330shy

310

290

250shy

170shy

150shy

130shy

110shy

Total Population

Persons Under Age 65

Medicare Admissions Age 65 and Over

1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978

HEALTH CARE FINANCING REVIEW SPRING 1980 7 3

The Cost of Living Council in its evaluation of the early part of the ESP program reported that controls on hospital charges shifted the burden of increasing hospital expenses toward cost reimbursement proshygrams such as Medicare and Medicaid and away fromcharge reimbursement payment mechanisms such as private insurance Because Medicare and Medicaid serve mainly the aged and children while charge reimshybursement serves many of the 19 to 64 age group the early ESP regulations tended to shift increasing hospital costs to the aged and those 18 and under This affected the age distribution of hospital care exshypenses

Channels of Payment

PUBLIC CHANNELS

Public funding of health care for all age groups has been shifting from State and local governments to the Federal government In 1965 the main sources of public financing of health care were State and local governments which provided over half of the $79 billion in public money spent for health care Most of these non-Federal public funds were spent for the mid-age group which comprised the largest proportion of persons in non-Federal government psychiatric hospitals By 1970 the State and local share of public health care spending had declined to 35 percent and

by 1978 the share was down to 29 percent The decline in the percentage of health care spending by State and local governments may be traced to two factors the growth of Federal programs which parshytially replaced State and local public assistance spending for medical care and the decrease in populashytions of State and local governmental psychiatric hospitals The Federal share of total public health care spending grew from 48 percent in 1965 to 71 pershycent in 1978 Between 1965 and 1978 inclusively the Federal share grew from 51 percent to 86 percent for the aged from 43 percent to 57 percent for the midshyage group and from 61 percent to 66 percent for pershysons under age 19 The distribution of total personal health spending in 1978 by age group and source of public payment is displayed in Figure 5

In 1965 the Veterans Administration the Departshyment of Defense and workers compensation also proshyvided health caremdashmainly for the mid-age group These programs spent $275 billion and accounted for 35 percent of all public spending in 1965 In 1978 they spent $116 billion but their share of public spending diminished to 17 percent reflecting the rapid growth in Medicare and Medicaid spending Public financing as a percent of all health care funding grew rapidly after the introduction of Medicare and Medicaid in 1966 but more recently appears to have stabilized for all age groups (Table 6) Although public funding of personal health care expenditures continues to grow State and local funding as a percent of total expenshyditures had declined

TABLE 6

Percentage Distribution of Funding for Personal Health Care for Selected Calendar Years 1965 to 1978

Age Group 1978 1977 1970 1970 1965

All Ages Total 1000 1000 1000 1000 1000

Private 613 610 609 659 789 Public 387 390 391 341 211

Federal 277 276 275 222 101 State and Local 110 114 116 120 110

Under age 19 Total 1000 1000 1000 1000 1000

Private 713 715 711 761 845 Public 287 285 285 239 155

Federal 189 187 193 142 94 State and Local 98 98 97 97 61

Ages 19-64 Total 1000 1000 1000 1000 1000

Private 714 712 711 754 808 Public 286 288 289 246 192

Federal 162 160 160 111 83 State and Local 124 128 128 135 110

Ages 65 and Over Total 1000 1000 1000 1000 1000

Private 368 361 355 388 701 Public 632 639 645 612 299

Federal 542 547 547 513 154 State and Local 89 92 98 99 144

HEALTH CARE FINANCING REVIEW SPRING 1980 74

FIGURE 5 Percentage Distribution of Personal Health Care Expenditures by Source of Funds and Age Group

Calendar Year 1978

$986 billion

72

$494 billion

37

9

$199 billion 12

54 71

16 10 19

Under 19 19-64 65 and over

Age Group

Private

State and Local Government

Federal Government

HEALTH CARE FINANCING REVIEW SPRING 1980 7 5

Medicare and Medicaid

Two-thirds of all public financing of health care is provided by Medicare and Medicaid Although Medicare finances health care primarily for aged pershysons Medicaid finances health care for all ages as shown by Table 7

TABLE 7 Percent of Total Personal Health Care

Expenditures Financed by Public Programs 1978

Age Group Medicare Medicaid Other

All ages 148 109 130 Under 19 2 158 127 19-64 32 87 167 65 and Over 441 134 57

Medicare In 1978 Medicare provided 44 percent of all health

care costs for the aged compared to 39 percent in 1970 Part of this increase can be attributed to the risshying proportion of hospital care funded by Medicare Medicare paid 71 percent of hospital care costs in 1970 and 75 percent in 1978 This increase was not due to explicit policy decisions It resulted from changes in the mix of psychiatric and non-psychiatric hospital care Between 1955 and 1978 the average daily census in psychiatric hospitals fell from 677000 patients to 190000 patients the age distribution of the average daily census remained fairly constant Consequently community hospital days grew as a share of total hospital days for the aged This increasshying proportion of more highly reimbursed care has caused the increase in the Medicare share of total hospital care for the aged

The proportion of physician expenses paid by Medicare also has increased This occurred because the Medicare annual deductible increased from $50 to $60 in 1973 but has not changed since despite rapid increases in allowed charges for physicians care Table 8 shows that from 1971 to 1977 the deductible expense for physicians services under Medicare decreased from about 19 percent to 12 percent of all allowed charges

TABLE 8 Physicians Services Percentage Distribution of Reimbursements Coinsurance and Deductibles

Selected Calendar Years 1971-1977

1977

Percent

Allowed Charges 1000

Reimbursement 707Coinsurance 177Deductible 116Source Unpublished HCFA data

Medicaid

Medicaid pays a significant part of hospital and physician care costs for persons under age 19 In 1977 about a fourth of all hospital spending and about one dollar of every eight spent for physician care for this group was financed by Medicaid (Table 9) Medicaid paid 39 percent of nursing home costs for persons aged 65 and over in 1978 It appears that the proportion of nursing home care costs paid by Medicaid and Medicare has been decreasing in recent years

In 1978 the program spent $86 billion for persons aged 19 to 64 which represented 47 percent of total Medicaid expenditures Two groups of Medicaid recishypients in this mid-age range accounted for most of these expenditures disabled persons under age 65 who comprised about one-ninth of all Medicaid recishypients but for whom about one-fifth of all Medicaid expenditures were made and adults in families with dependent children who comprised about one-fifth of all Medicaid recipients and for whom about one-sixth of all Medicaid expenditures were made

197(5 1972 1971

Percent Percent Percent

1000 1000 1000

688 175 127

655 164 181

650 162 188

THE INTERACTION OF PRIVATE AND PUBLIC CHANNELS

Direct or out-of-pocket payments and private inshysurance financed most health care costs for younger age groups while public monies dominated funding for aged persons Major channels of payment for all age groups in 1977 are shown in Table 9 by selected types of medical care

Hospitals were the major recipients of public and private funding for health care receiving 34 percent of private funds and 63 percent of public funds The changing structure of source of payment for hospital care is an important determinant of public and private health care funding policy Although no comprehenshysive survey of sources of payment for hospital care by age group is available data from various public and private sources may be merged to estimate the flow of funds by age group in the hospital industry Table 10 represents this flow of funds for the years 1970 and 1977 Medicare provided an increasing share of

HEALTH CARE FINANCING REVIEWSPRING 1980 76

FIGURE 6 Per Capita Personal Health Care Expenditures for the Aged

by Source of Funds and by Type of Care Calendar Year 1978

$2026

Private $746

Other Public $115|

Programs

Medicaid $271

$869

$109 $792

Medicaid $81

-$31

$490

Medicare $893

$366

$648 $149 $30

Medicare $3

-$11 $230

$2031

bull$42

Total Hospital Physicians All Other Care Services

HEALTH CARE FINANCING REVIEW SPRING 1980 7 7

TABLE 9

Percentage Distribution of Health Care Expenditures by Channels of Payment for Hospital Care Physicians Services and All Other Health Care Services Calendar Year 1977

Private Public

Private Direct Health

Age Group Total Total Payments Insurance Other Total Medicare Medicaid Other

All Personal Health Care All Ages 1000 610 318 279 13 390 146 112 132 Under 19 1000 715 381 327 7 285 1 156 128 19-64 1000 712 319 374 19 288 30 89 169 65 and Over 1000 361 291 66 4 639 442 138 59

Hospital Care All Ages 1000 456 83 362 11 544 239 95 210 Under 19 1000 546 37 507 2 454 mdash 250 204 19-64 1000 592 107 469 16 408 49 96 263 65 and Over 1000 120 46 71 3 880 747 39 94

Physician Care All Ages 1000 741 339 401 1 259 147 60 52 Under 19 1000 844 387 457 mdash 156 4 121 31 19-64 1000 845 357 486 1 155 24 56 75 65 and Over 1000 418 262 155 mdash 582 542 31 9

All Other Care All Ages 1000 739 625 90 24 261 19 167 75 Under 19 1000 785 702 69 15 215 - 92 123 19-64 1000 812 634 140 38 188 2 102 84 65 and Over 1000 606 580 19 7 394 53 299 42

community and related hospital spending and private insurance declined due to the extension of Medicare coverage to certain disabled persons under age 65

The proportion of hospital spending for the aged paid by Medicare decreased slightly over the period According to Medicare actuaries more than a million persons aged 65 and over are ineligible for hospital inshysurance under Medicare These persons are predominantly retired government employees whose private insurance continues at retirement and covers most of their physician and hospital care

DIRECT PAYMENTS BY PERSONS AGED 65 AND OVER

Out-of-pocket payments for health care continue to be a major expense for aged persons In 1977 pershysons aged 65 and over paid 29 percent of their health care costs out-of-pocket The amounts paid out-ofshypocket vary considerably by the type of care provided

The out-of-pocket liability of the elderly for hospital care has changed dramatically since 1965mdashthe year before Medicare and Medicaid began About 13 pershycent of spending for hospital care was paid out-ofshypocket in 1965 compared to less than five percent by 1977

The elderly make out-of-pocket payments for physishycians care for that part of the deductible and coinshysurance not paid by Medicaid or private insurance for physicians charges not allowed by Medicare but colshylectable from beneficiaries and for medical services not covered by Medicare Physicians billings to pashytients for charges denied by Medicare because the charges exceed the allowed amounts add a signifishycant amount to patients liabilities generally not covered by private insurance Through 1976 the percentage of total physicians charges paid by Medicare declined because of the growing obligations of Medicare beneficiaries for physicians charges on unassigned claims that were submitted by physishycians but disallowed These disallowed charges to beneficiaries increased from two percent of the total physician bill for the aged in fiscal year 1968 to about 10 percent in calendar year 1976 where they remained through 1978 In dollar terms these out-of-pocket exshypenses for physicians services were about $84 per capita in 1977 and preliminary estimates indicate that the costs will rise to about $96 per capita in 1978

Payment for nursing home care represents the largest health care liability for persons aged 65 and overmdashestimated at $271 per capita in 1978 up from $228 in 1977 and $109 in 1970 About 52 percent of nursing home care was financed out-of-pocket by beneficiaries in 1978

HEALTH CARE FINANCING REVIEW SPRING 1980 78

TABLE 10

Hospital Expenditures and Percentage Distribution of Channels of Payment by Type of Hospital and Age Group Calendar Years 1970 and 1977 (Dollar amounts In millions)

1977 1970

65 and 65 and Total Under 19 19-64 Over Total Under 19 19-64 Over

Psychiatric Hospitals (non-Federal) $4015 $199 $2632 $1184 $2534 $81 $1710 $744 State and Local Hospitals

Sources of Payment-Total 1000 100-0 1000 1000 1000 1000 1000 1000 Medicare 17 mdash 4 49 5 mdash mdash 16 Medicaid 187 347 153 236 110 37 5 359 Other Federal 15 70 15 5 15 99 15 5 Other State and Local 446 85 465 465 701 741 791 489 Private Health Insurance 140 412 180 6 10 37 12 1 Direct Payment 195 85 183 239 159 86 176 129

Private Hospitals $661 $33 $433 $195 $258 $8 $174 $76

Sources of Payment-Total 1000 1000 1000 1000 1000 1000_ 1000 1000 Medicare 17 - 5 46 35 mdash mdash 118 Other State and Local 11 30 12 5 19 mdash 29 mdash Private Health Insurance 700 848 774 508 481 375 483 487 Philanthropy 39 30 39 41 39 125 34 39 Direct Payments 234 91 171 400 426 500 454 355

Federal Hospitals $6099 $747 $4595 $757 $2822 $499 $2025 $349

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Veterans Administration 586 - 636 856 533 mdash 599 828 Department of Defense 322 631 312 83 380 835 328 92 Other 92 369 52 61 88 165 73 80

Other Hospitals $57139 $5572 $34806 $16761 $22184 $2901 $13397 $5885

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Medicare 282 1 60 838 223 mdash - 842 Medicaid 99 281 105 27 88 169 99 23 Workers Compensation 23 mdash 37 2 23 mdash 38 3 State and Local Public Assistance 7 3 11 2 9 11 11 2 Other State and Local 59 13 86 19 70 95 87 19 Department of Defense 7 18 9 1 11 30 11 1 Other Government Programs 15 66 10 6 9 23 10 1 Philanthropy 12 3 19 2 15 5 19 10 Private Health Insurance 412 576 548 76 444 588 585 54 Direct Payments 83 40 115 28 107 80 140 44

Payments for drugs and drug sundries and for denshytists services are another major expense Precise dollar amounts for these payments are not currently available although surveys now under way will proshyvide estimates of out-of-pocket expenses for these types of care as well as for other health services Out-of-pocket spending for drugs and dentists sershyvices is estimated at $150 per capita in 1977 and $160 in 1978

Medicare Supplementary Medical Insurance (SMI) and private health insurance premiums are also paid out-of-pocket at a rate of $78 per capita for SMI and $90 per capita for private health insurance Persons aged 65 and over paid an average of about $698 for health related services and items out-of-pocket in 1977mdashrepresenting 12 percent of their $5900 average income

Conclusions Spending for health care varies significantly by age

group Per capita health spending increases steadily with age for most health care sectors

Young persons are spending a decreasing share of the health dollar because they are declining as a pershycent of the total population Private sources of payshyment provide most of the health expenses for the young

The middle age group spends most of the health care dollar because it is the largest age group Most health expenses for this group are paid by private sources

Persons aged 65 and over continue to increase steadily as a percent of the total population The health care needs of these persons shown by current use of various sectors of health care are expected to

HEALTH CARE FINANCING REVIEW SPRING 1980 79

grow along with their numbers resulting in an inshycreasing share of personal health care spending for and by the elderly Public financing has been and conshytinues to be the major source of funding for personal health care costs for the aged As the aged populashytion continues to grow in the future the need for public financing of health care costs is expected to increase especially for those types of care which aged persons use more oftenmdashhospital care physishycians services and nursing home care The populashytion within the age group 65 and over is aging and is expected to add to the need for health care services especially nursing home care Health care policy and financing must continue to cope with these trends which are expected to continue for many years to come

AcknowledgmentsThe author is indebted to Mary E Rieder Acting Director

of the Division of National Cost Estimates to members of the Division of National Cost Estimates and Intern Karen Young for their comments and suggestions and to Joanie Henderson and Ann Leake for secretarial assistance

Technical Note A

CONCEPTS AND DEFINITIONS

All estimates in this report relate to personal health care expendituresmdashthat portion of the total national health care expense representing health services and supplies received directly by individuals They make up total national expenditures for health together with spending for research and medical facilities conshystruction identifiable administrative costs of governshyment programs government public health activities expenses incurred by philanthropic organizations in raising funds for health care and the net costs of private health insurance (the difference between premiums and benefit payments)

All expenditures for health care that are channeled through any program established by public law are treated as public expenditures in these estimates Exshypenditures under workers compensation programs for example are included with government expenshyditures although they involve benefits paid by private insurers from premiums collected from private sources

Funds disbursed by public programs are reported as program expenditures even for example when they include significant private contributions made by beneficiaries as in the Supplementary Medical Inshysurance (SMI) program The benefit expenditures reported in this series are not adjusted to eliminate the duplication that exists when payments are made by State governments into the Medicare trust fund in the form of SMI premiums for public assistance and Supplemental Security Income (SSI) recipients and they are reported as Medicaid expenditures The amount paid by Medicaid as premiums in 1978 was $288 million for all beneficiaries that portion not reshytained in the trust fund is duplicated as a Medicare expense The amount does not noticeably affect the relationships that are reported

Health expenditures by State and local governshyments that involve funds received from the Federal government under revenue sharing are reported as State and local expenditures not as Federal expenshyditures These funds amounted to $232 million in the first half of fiscal year 1976 the latest period for which data are available No information is available on the use of such funds by specific programs

Responsibility for compiling estimates of national health care spending now resides with the Health Care Financing Administration (HCFA) Department of Health and Human Services Definitions of the various types of health care and descriptions of the public programs are contained in the various articles in the series carrying estimates for expenditures (Gibson 1979 Carroll 1979)

It should be noted that hospital care includes all exshypenditures for care in hospitalsmdashboth inpatient and outpatient The data cover all services and supplies provided

Population estimates used here are selected to corshyrespond to the population covered by expenditure estimates Since national health expenditures cover all spending for or by United States citizens and residents population estimates include the institushytionalized population the Armed Forces (both in the United States and overseas) Federal civilian employees overseas and the civilian population of outlying areas

The group under age 19 presents some problems in connection with the available demographic informashytion on utilization and expenditures Extensive intershypolation is often required to estimate certain types of expenditures for this group Because of the nature of some data sources expenses for certain persons under age 19 who are part of the labor force are not separable from those aged 19 to 64 and expenses of dependent children over age 18 are included with those of the younger group

Technical Note B

The Health Interview Survey (HIS) which provided the data for Table 2 continuously samples members of households It was not intended to obtain complete information on the deceased nor on the six percent of the aged population who are institutionalized Thus Table 2 tends to underestimate the volume of services used by the aged The degree of this underestimation can be evaluated by comparing the statistics in Table 2 to other data A 1973 study (the latest available) determined that six percent of the aged population is institutionalized in psychiatric and long-stay hospitals or nursing homes Institutionalized persons had more frequent admissions and a longer average length of stay than did the noninstitutionalized elderly [Deacon 1977] This study also determined that the institushytionalized elderly used 25 times more physician sershyvices and twice as many drug prescriptions per capita than did their noninstitutionalized counterparts Thus Table 2 significantly underestimates hospital use by the elderly

HEALTH CARE FINANCING REVIEWSPRING 1980 80

It is also necessary to evaluate peoples health exshypenditures in the year of their death to assess the underestimate of the values in Table 2 The Health Inshyterview Survey captures only about half of the health care use of persons dying in the survey year The following table presents the disproportionate share of Medicare dollars spent for aged persons who died in 1976

Technical Note C

Table A Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Years 197819771976 19701965

Table B Estimated Personal Health Care Expenshyditures under Public Programs by Type of Expenditure and Source of Funds for Three Age Groups for Calendar Years 19781977 1976 1970 1965

Table C Expenditures for Health Services and Supshyplies under Public Programs by Program for Three Age Groups for Calendar Years 1978 19771976 1970 1965

Table D Estimated Amount and Percentage Distribution of Personal Health Care Exshypenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 197819771976 1970 1965

Distribution of Medicare Expenditures for Persons Who Died in 1976

Percent of Medicare Percent of Total Recipients Who Died Medicare Dollars

Age Group in 1976 Spent for Those Recipients

All ages 65 and Over 79 207

65-69 40 15370-74 58 18575-79 80 20380-84 118 24985 and Over 198 321

Source Unpublished HCFA data

TABLE A

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1978

All Ages Under 19 19-64 65 and Over

Type of Expenditure Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate amount (in millions)

Total $167911 $102870 $65042 $19875 $14180 $5696 $98668 $70497 $28172 $49366 $18192 $31175

Hospital Care 76025 35107 40919 7070 3835 3235 47785 28626 19159 21169 2645 18524 PhysiciansServices 35250 25811 9439 5215 4382 833 21124 17808 3316 8910 3620 5290 Dentists Services 13300 12761 539 2780 2546 234 9137 8876 261 1383 1338 45 Other Professional Services 4275 3303 972 398 193 205 2787 2480 307 1090 631 459 Drugs and Drug Sundries 15098 13798 1300 2823 2650 173 9044 8419 625 3231 2728 503 Eyeglasses and Appliances 3879 3522 357 481 459 22 2793 2659 134 605 405 201 Nursing-Home Care 15751 7394 8358 68 1 67 3057 600 2457 12624 6790 5834 Other Health Services 4333 1175 3158 1040 113 927 2941 1028 1913 354 35 319

Per Capita Amount Total $75298 $46131 $29167 $28607 $20410 $8199 $76396 $54584 $21813 $202619 $74668 $127955

Hospital Care 34093 15743 18350 10176 5520 4656 36998 22164 14834 86886 10856 76030 PhysiciansServices 15808 11575 4233 7506 6307 1199 16356 13788 2567 36570 14858 21712 DentistsServices 5964 5723 242 4001 3665 337 7075 6872 202 5676 5492 185 Other Professional Services 1917 1481 436 573 278 295 2158 1920 238 4474 2590 1884 Drugs and Drug Sundries 6770 6187 583 4063 3814 249 7002 6519 484 13261 11197 2064 Eyeglasses and Appliances 1740 1579 160 692 661 32 2162 2059 104 2483 1662 825 Nursing-Home Care 7064 3316 3748 100 01 96 2367 465 1902 51814 27869 23945 Other Health Services 1943 527 1416 1497 163 1334 2277 796 1481 1453 144 1310

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 453 341 629 356 270 568 484 406 680 429 145 594 PhysiciansServices 210 251 145 262 309 146 214 253 118 180 199 170 Dentists Services 79 124 8 140 180 41 93 126 9 28 74 1 Other Professional Services 25 32 15 20 14 36 28 35 11 22 35 15 Drugs and Drug Sundries 90 134 20 142 187 30 92 119 22 65 150 16 Eyeglasses and Appliances 23 34 5 24 32 4 28 38 5 12 22 6 Nursing-Home Care 94 72 129 3 mdash 12 31 9 87 256 373 187 Other Health Services 26 11 49 52 8 163 30 15 68 7 2 10

8 1 HEALTH CARE FINANCING REVIEW SPRING 1980

FIGURE 4 Short-Stay Hospital Admission Rates for Selected Populations

Years Ending June 1967-78

350

Adm

issi

ons

per

100

0 P

opul

atio

n

330shy

310

290

250shy

170shy

150shy

130shy

110shy

Total Population

Persons Under Age 65

Medicare Admissions Age 65 and Over

1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978

HEALTH CARE FINANCING REVIEW SPRING 1980 7 3

The Cost of Living Council in its evaluation of the early part of the ESP program reported that controls on hospital charges shifted the burden of increasing hospital expenses toward cost reimbursement proshygrams such as Medicare and Medicaid and away fromcharge reimbursement payment mechanisms such as private insurance Because Medicare and Medicaid serve mainly the aged and children while charge reimshybursement serves many of the 19 to 64 age group the early ESP regulations tended to shift increasing hospital costs to the aged and those 18 and under This affected the age distribution of hospital care exshypenses

Channels of Payment

PUBLIC CHANNELS

Public funding of health care for all age groups has been shifting from State and local governments to the Federal government In 1965 the main sources of public financing of health care were State and local governments which provided over half of the $79 billion in public money spent for health care Most of these non-Federal public funds were spent for the mid-age group which comprised the largest proportion of persons in non-Federal government psychiatric hospitals By 1970 the State and local share of public health care spending had declined to 35 percent and

by 1978 the share was down to 29 percent The decline in the percentage of health care spending by State and local governments may be traced to two factors the growth of Federal programs which parshytially replaced State and local public assistance spending for medical care and the decrease in populashytions of State and local governmental psychiatric hospitals The Federal share of total public health care spending grew from 48 percent in 1965 to 71 pershycent in 1978 Between 1965 and 1978 inclusively the Federal share grew from 51 percent to 86 percent for the aged from 43 percent to 57 percent for the midshyage group and from 61 percent to 66 percent for pershysons under age 19 The distribution of total personal health spending in 1978 by age group and source of public payment is displayed in Figure 5

In 1965 the Veterans Administration the Departshyment of Defense and workers compensation also proshyvided health caremdashmainly for the mid-age group These programs spent $275 billion and accounted for 35 percent of all public spending in 1965 In 1978 they spent $116 billion but their share of public spending diminished to 17 percent reflecting the rapid growth in Medicare and Medicaid spending Public financing as a percent of all health care funding grew rapidly after the introduction of Medicare and Medicaid in 1966 but more recently appears to have stabilized for all age groups (Table 6) Although public funding of personal health care expenditures continues to grow State and local funding as a percent of total expenshyditures had declined

TABLE 6

Percentage Distribution of Funding for Personal Health Care for Selected Calendar Years 1965 to 1978

Age Group 1978 1977 1970 1970 1965

All Ages Total 1000 1000 1000 1000 1000

Private 613 610 609 659 789 Public 387 390 391 341 211

Federal 277 276 275 222 101 State and Local 110 114 116 120 110

Under age 19 Total 1000 1000 1000 1000 1000

Private 713 715 711 761 845 Public 287 285 285 239 155

Federal 189 187 193 142 94 State and Local 98 98 97 97 61

Ages 19-64 Total 1000 1000 1000 1000 1000

Private 714 712 711 754 808 Public 286 288 289 246 192

Federal 162 160 160 111 83 State and Local 124 128 128 135 110

Ages 65 and Over Total 1000 1000 1000 1000 1000

Private 368 361 355 388 701 Public 632 639 645 612 299

Federal 542 547 547 513 154 State and Local 89 92 98 99 144

HEALTH CARE FINANCING REVIEW SPRING 1980 74

FIGURE 5 Percentage Distribution of Personal Health Care Expenditures by Source of Funds and Age Group

Calendar Year 1978

$986 billion

72

$494 billion

37

9

$199 billion 12

54 71

16 10 19

Under 19 19-64 65 and over

Age Group

Private

State and Local Government

Federal Government

HEALTH CARE FINANCING REVIEW SPRING 1980 7 5

Medicare and Medicaid

Two-thirds of all public financing of health care is provided by Medicare and Medicaid Although Medicare finances health care primarily for aged pershysons Medicaid finances health care for all ages as shown by Table 7

TABLE 7 Percent of Total Personal Health Care

Expenditures Financed by Public Programs 1978

Age Group Medicare Medicaid Other

All ages 148 109 130 Under 19 2 158 127 19-64 32 87 167 65 and Over 441 134 57

Medicare In 1978 Medicare provided 44 percent of all health

care costs for the aged compared to 39 percent in 1970 Part of this increase can be attributed to the risshying proportion of hospital care funded by Medicare Medicare paid 71 percent of hospital care costs in 1970 and 75 percent in 1978 This increase was not due to explicit policy decisions It resulted from changes in the mix of psychiatric and non-psychiatric hospital care Between 1955 and 1978 the average daily census in psychiatric hospitals fell from 677000 patients to 190000 patients the age distribution of the average daily census remained fairly constant Consequently community hospital days grew as a share of total hospital days for the aged This increasshying proportion of more highly reimbursed care has caused the increase in the Medicare share of total hospital care for the aged

The proportion of physician expenses paid by Medicare also has increased This occurred because the Medicare annual deductible increased from $50 to $60 in 1973 but has not changed since despite rapid increases in allowed charges for physicians care Table 8 shows that from 1971 to 1977 the deductible expense for physicians services under Medicare decreased from about 19 percent to 12 percent of all allowed charges

TABLE 8 Physicians Services Percentage Distribution of Reimbursements Coinsurance and Deductibles

Selected Calendar Years 1971-1977

1977

Percent

Allowed Charges 1000

Reimbursement 707Coinsurance 177Deductible 116Source Unpublished HCFA data

Medicaid

Medicaid pays a significant part of hospital and physician care costs for persons under age 19 In 1977 about a fourth of all hospital spending and about one dollar of every eight spent for physician care for this group was financed by Medicaid (Table 9) Medicaid paid 39 percent of nursing home costs for persons aged 65 and over in 1978 It appears that the proportion of nursing home care costs paid by Medicaid and Medicare has been decreasing in recent years

In 1978 the program spent $86 billion for persons aged 19 to 64 which represented 47 percent of total Medicaid expenditures Two groups of Medicaid recishypients in this mid-age range accounted for most of these expenditures disabled persons under age 65 who comprised about one-ninth of all Medicaid recishypients but for whom about one-fifth of all Medicaid expenditures were made and adults in families with dependent children who comprised about one-fifth of all Medicaid recipients and for whom about one-sixth of all Medicaid expenditures were made

197(5 1972 1971

Percent Percent Percent

1000 1000 1000

688 175 127

655 164 181

650 162 188

THE INTERACTION OF PRIVATE AND PUBLIC CHANNELS

Direct or out-of-pocket payments and private inshysurance financed most health care costs for younger age groups while public monies dominated funding for aged persons Major channels of payment for all age groups in 1977 are shown in Table 9 by selected types of medical care

Hospitals were the major recipients of public and private funding for health care receiving 34 percent of private funds and 63 percent of public funds The changing structure of source of payment for hospital care is an important determinant of public and private health care funding policy Although no comprehenshysive survey of sources of payment for hospital care by age group is available data from various public and private sources may be merged to estimate the flow of funds by age group in the hospital industry Table 10 represents this flow of funds for the years 1970 and 1977 Medicare provided an increasing share of

HEALTH CARE FINANCING REVIEWSPRING 1980 76

FIGURE 6 Per Capita Personal Health Care Expenditures for the Aged

by Source of Funds and by Type of Care Calendar Year 1978

$2026

Private $746

Other Public $115|

Programs

Medicaid $271

$869

$109 $792

Medicaid $81

-$31

$490

Medicare $893

$366

$648 $149 $30

Medicare $3

-$11 $230

$2031

bull$42

Total Hospital Physicians All Other Care Services

HEALTH CARE FINANCING REVIEW SPRING 1980 7 7

TABLE 9

Percentage Distribution of Health Care Expenditures by Channels of Payment for Hospital Care Physicians Services and All Other Health Care Services Calendar Year 1977

Private Public

Private Direct Health

Age Group Total Total Payments Insurance Other Total Medicare Medicaid Other

All Personal Health Care All Ages 1000 610 318 279 13 390 146 112 132 Under 19 1000 715 381 327 7 285 1 156 128 19-64 1000 712 319 374 19 288 30 89 169 65 and Over 1000 361 291 66 4 639 442 138 59

Hospital Care All Ages 1000 456 83 362 11 544 239 95 210 Under 19 1000 546 37 507 2 454 mdash 250 204 19-64 1000 592 107 469 16 408 49 96 263 65 and Over 1000 120 46 71 3 880 747 39 94

Physician Care All Ages 1000 741 339 401 1 259 147 60 52 Under 19 1000 844 387 457 mdash 156 4 121 31 19-64 1000 845 357 486 1 155 24 56 75 65 and Over 1000 418 262 155 mdash 582 542 31 9

All Other Care All Ages 1000 739 625 90 24 261 19 167 75 Under 19 1000 785 702 69 15 215 - 92 123 19-64 1000 812 634 140 38 188 2 102 84 65 and Over 1000 606 580 19 7 394 53 299 42

community and related hospital spending and private insurance declined due to the extension of Medicare coverage to certain disabled persons under age 65

The proportion of hospital spending for the aged paid by Medicare decreased slightly over the period According to Medicare actuaries more than a million persons aged 65 and over are ineligible for hospital inshysurance under Medicare These persons are predominantly retired government employees whose private insurance continues at retirement and covers most of their physician and hospital care

DIRECT PAYMENTS BY PERSONS AGED 65 AND OVER

Out-of-pocket payments for health care continue to be a major expense for aged persons In 1977 pershysons aged 65 and over paid 29 percent of their health care costs out-of-pocket The amounts paid out-ofshypocket vary considerably by the type of care provided

The out-of-pocket liability of the elderly for hospital care has changed dramatically since 1965mdashthe year before Medicare and Medicaid began About 13 pershycent of spending for hospital care was paid out-ofshypocket in 1965 compared to less than five percent by 1977

The elderly make out-of-pocket payments for physishycians care for that part of the deductible and coinshysurance not paid by Medicaid or private insurance for physicians charges not allowed by Medicare but colshylectable from beneficiaries and for medical services not covered by Medicare Physicians billings to pashytients for charges denied by Medicare because the charges exceed the allowed amounts add a signifishycant amount to patients liabilities generally not covered by private insurance Through 1976 the percentage of total physicians charges paid by Medicare declined because of the growing obligations of Medicare beneficiaries for physicians charges on unassigned claims that were submitted by physishycians but disallowed These disallowed charges to beneficiaries increased from two percent of the total physician bill for the aged in fiscal year 1968 to about 10 percent in calendar year 1976 where they remained through 1978 In dollar terms these out-of-pocket exshypenses for physicians services were about $84 per capita in 1977 and preliminary estimates indicate that the costs will rise to about $96 per capita in 1978

Payment for nursing home care represents the largest health care liability for persons aged 65 and overmdashestimated at $271 per capita in 1978 up from $228 in 1977 and $109 in 1970 About 52 percent of nursing home care was financed out-of-pocket by beneficiaries in 1978

HEALTH CARE FINANCING REVIEW SPRING 1980 78

TABLE 10

Hospital Expenditures and Percentage Distribution of Channels of Payment by Type of Hospital and Age Group Calendar Years 1970 and 1977 (Dollar amounts In millions)

1977 1970

65 and 65 and Total Under 19 19-64 Over Total Under 19 19-64 Over

Psychiatric Hospitals (non-Federal) $4015 $199 $2632 $1184 $2534 $81 $1710 $744 State and Local Hospitals

Sources of Payment-Total 1000 100-0 1000 1000 1000 1000 1000 1000 Medicare 17 mdash 4 49 5 mdash mdash 16 Medicaid 187 347 153 236 110 37 5 359 Other Federal 15 70 15 5 15 99 15 5 Other State and Local 446 85 465 465 701 741 791 489 Private Health Insurance 140 412 180 6 10 37 12 1 Direct Payment 195 85 183 239 159 86 176 129

Private Hospitals $661 $33 $433 $195 $258 $8 $174 $76

Sources of Payment-Total 1000 1000 1000 1000 1000 1000_ 1000 1000 Medicare 17 - 5 46 35 mdash mdash 118 Other State and Local 11 30 12 5 19 mdash 29 mdash Private Health Insurance 700 848 774 508 481 375 483 487 Philanthropy 39 30 39 41 39 125 34 39 Direct Payments 234 91 171 400 426 500 454 355

Federal Hospitals $6099 $747 $4595 $757 $2822 $499 $2025 $349

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Veterans Administration 586 - 636 856 533 mdash 599 828 Department of Defense 322 631 312 83 380 835 328 92 Other 92 369 52 61 88 165 73 80

Other Hospitals $57139 $5572 $34806 $16761 $22184 $2901 $13397 $5885

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Medicare 282 1 60 838 223 mdash - 842 Medicaid 99 281 105 27 88 169 99 23 Workers Compensation 23 mdash 37 2 23 mdash 38 3 State and Local Public Assistance 7 3 11 2 9 11 11 2 Other State and Local 59 13 86 19 70 95 87 19 Department of Defense 7 18 9 1 11 30 11 1 Other Government Programs 15 66 10 6 9 23 10 1 Philanthropy 12 3 19 2 15 5 19 10 Private Health Insurance 412 576 548 76 444 588 585 54 Direct Payments 83 40 115 28 107 80 140 44

Payments for drugs and drug sundries and for denshytists services are another major expense Precise dollar amounts for these payments are not currently available although surveys now under way will proshyvide estimates of out-of-pocket expenses for these types of care as well as for other health services Out-of-pocket spending for drugs and dentists sershyvices is estimated at $150 per capita in 1977 and $160 in 1978

Medicare Supplementary Medical Insurance (SMI) and private health insurance premiums are also paid out-of-pocket at a rate of $78 per capita for SMI and $90 per capita for private health insurance Persons aged 65 and over paid an average of about $698 for health related services and items out-of-pocket in 1977mdashrepresenting 12 percent of their $5900 average income

Conclusions Spending for health care varies significantly by age

group Per capita health spending increases steadily with age for most health care sectors

Young persons are spending a decreasing share of the health dollar because they are declining as a pershycent of the total population Private sources of payshyment provide most of the health expenses for the young

The middle age group spends most of the health care dollar because it is the largest age group Most health expenses for this group are paid by private sources

Persons aged 65 and over continue to increase steadily as a percent of the total population The health care needs of these persons shown by current use of various sectors of health care are expected to

HEALTH CARE FINANCING REVIEW SPRING 1980 79

grow along with their numbers resulting in an inshycreasing share of personal health care spending for and by the elderly Public financing has been and conshytinues to be the major source of funding for personal health care costs for the aged As the aged populashytion continues to grow in the future the need for public financing of health care costs is expected to increase especially for those types of care which aged persons use more oftenmdashhospital care physishycians services and nursing home care The populashytion within the age group 65 and over is aging and is expected to add to the need for health care services especially nursing home care Health care policy and financing must continue to cope with these trends which are expected to continue for many years to come

AcknowledgmentsThe author is indebted to Mary E Rieder Acting Director

of the Division of National Cost Estimates to members of the Division of National Cost Estimates and Intern Karen Young for their comments and suggestions and to Joanie Henderson and Ann Leake for secretarial assistance

Technical Note A

CONCEPTS AND DEFINITIONS

All estimates in this report relate to personal health care expendituresmdashthat portion of the total national health care expense representing health services and supplies received directly by individuals They make up total national expenditures for health together with spending for research and medical facilities conshystruction identifiable administrative costs of governshyment programs government public health activities expenses incurred by philanthropic organizations in raising funds for health care and the net costs of private health insurance (the difference between premiums and benefit payments)

All expenditures for health care that are channeled through any program established by public law are treated as public expenditures in these estimates Exshypenditures under workers compensation programs for example are included with government expenshyditures although they involve benefits paid by private insurers from premiums collected from private sources

Funds disbursed by public programs are reported as program expenditures even for example when they include significant private contributions made by beneficiaries as in the Supplementary Medical Inshysurance (SMI) program The benefit expenditures reported in this series are not adjusted to eliminate the duplication that exists when payments are made by State governments into the Medicare trust fund in the form of SMI premiums for public assistance and Supplemental Security Income (SSI) recipients and they are reported as Medicaid expenditures The amount paid by Medicaid as premiums in 1978 was $288 million for all beneficiaries that portion not reshytained in the trust fund is duplicated as a Medicare expense The amount does not noticeably affect the relationships that are reported

Health expenditures by State and local governshyments that involve funds received from the Federal government under revenue sharing are reported as State and local expenditures not as Federal expenshyditures These funds amounted to $232 million in the first half of fiscal year 1976 the latest period for which data are available No information is available on the use of such funds by specific programs

Responsibility for compiling estimates of national health care spending now resides with the Health Care Financing Administration (HCFA) Department of Health and Human Services Definitions of the various types of health care and descriptions of the public programs are contained in the various articles in the series carrying estimates for expenditures (Gibson 1979 Carroll 1979)

It should be noted that hospital care includes all exshypenditures for care in hospitalsmdashboth inpatient and outpatient The data cover all services and supplies provided

Population estimates used here are selected to corshyrespond to the population covered by expenditure estimates Since national health expenditures cover all spending for or by United States citizens and residents population estimates include the institushytionalized population the Armed Forces (both in the United States and overseas) Federal civilian employees overseas and the civilian population of outlying areas

The group under age 19 presents some problems in connection with the available demographic informashytion on utilization and expenditures Extensive intershypolation is often required to estimate certain types of expenditures for this group Because of the nature of some data sources expenses for certain persons under age 19 who are part of the labor force are not separable from those aged 19 to 64 and expenses of dependent children over age 18 are included with those of the younger group

Technical Note B

The Health Interview Survey (HIS) which provided the data for Table 2 continuously samples members of households It was not intended to obtain complete information on the deceased nor on the six percent of the aged population who are institutionalized Thus Table 2 tends to underestimate the volume of services used by the aged The degree of this underestimation can be evaluated by comparing the statistics in Table 2 to other data A 1973 study (the latest available) determined that six percent of the aged population is institutionalized in psychiatric and long-stay hospitals or nursing homes Institutionalized persons had more frequent admissions and a longer average length of stay than did the noninstitutionalized elderly [Deacon 1977] This study also determined that the institushytionalized elderly used 25 times more physician sershyvices and twice as many drug prescriptions per capita than did their noninstitutionalized counterparts Thus Table 2 significantly underestimates hospital use by the elderly

HEALTH CARE FINANCING REVIEWSPRING 1980 80

It is also necessary to evaluate peoples health exshypenditures in the year of their death to assess the underestimate of the values in Table 2 The Health Inshyterview Survey captures only about half of the health care use of persons dying in the survey year The following table presents the disproportionate share of Medicare dollars spent for aged persons who died in 1976

Technical Note C

Table A Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Years 197819771976 19701965

Table B Estimated Personal Health Care Expenshyditures under Public Programs by Type of Expenditure and Source of Funds for Three Age Groups for Calendar Years 19781977 1976 1970 1965

Table C Expenditures for Health Services and Supshyplies under Public Programs by Program for Three Age Groups for Calendar Years 1978 19771976 1970 1965

Table D Estimated Amount and Percentage Distribution of Personal Health Care Exshypenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 197819771976 1970 1965

Distribution of Medicare Expenditures for Persons Who Died in 1976

Percent of Medicare Percent of Total Recipients Who Died Medicare Dollars

Age Group in 1976 Spent for Those Recipients

All ages 65 and Over 79 207

65-69 40 15370-74 58 18575-79 80 20380-84 118 24985 and Over 198 321

Source Unpublished HCFA data

TABLE A

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1978

All Ages Under 19 19-64 65 and Over

Type of Expenditure Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate amount (in millions)

Total $167911 $102870 $65042 $19875 $14180 $5696 $98668 $70497 $28172 $49366 $18192 $31175

Hospital Care 76025 35107 40919 7070 3835 3235 47785 28626 19159 21169 2645 18524 PhysiciansServices 35250 25811 9439 5215 4382 833 21124 17808 3316 8910 3620 5290 Dentists Services 13300 12761 539 2780 2546 234 9137 8876 261 1383 1338 45 Other Professional Services 4275 3303 972 398 193 205 2787 2480 307 1090 631 459 Drugs and Drug Sundries 15098 13798 1300 2823 2650 173 9044 8419 625 3231 2728 503 Eyeglasses and Appliances 3879 3522 357 481 459 22 2793 2659 134 605 405 201 Nursing-Home Care 15751 7394 8358 68 1 67 3057 600 2457 12624 6790 5834 Other Health Services 4333 1175 3158 1040 113 927 2941 1028 1913 354 35 319

Per Capita Amount Total $75298 $46131 $29167 $28607 $20410 $8199 $76396 $54584 $21813 $202619 $74668 $127955

Hospital Care 34093 15743 18350 10176 5520 4656 36998 22164 14834 86886 10856 76030 PhysiciansServices 15808 11575 4233 7506 6307 1199 16356 13788 2567 36570 14858 21712 DentistsServices 5964 5723 242 4001 3665 337 7075 6872 202 5676 5492 185 Other Professional Services 1917 1481 436 573 278 295 2158 1920 238 4474 2590 1884 Drugs and Drug Sundries 6770 6187 583 4063 3814 249 7002 6519 484 13261 11197 2064 Eyeglasses and Appliances 1740 1579 160 692 661 32 2162 2059 104 2483 1662 825 Nursing-Home Care 7064 3316 3748 100 01 96 2367 465 1902 51814 27869 23945 Other Health Services 1943 527 1416 1497 163 1334 2277 796 1481 1453 144 1310

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 453 341 629 356 270 568 484 406 680 429 145 594 PhysiciansServices 210 251 145 262 309 146 214 253 118 180 199 170 Dentists Services 79 124 8 140 180 41 93 126 9 28 74 1 Other Professional Services 25 32 15 20 14 36 28 35 11 22 35 15 Drugs and Drug Sundries 90 134 20 142 187 30 92 119 22 65 150 16 Eyeglasses and Appliances 23 34 5 24 32 4 28 38 5 12 22 6 Nursing-Home Care 94 72 129 3 mdash 12 31 9 87 256 373 187 Other Health Services 26 11 49 52 8 163 30 15 68 7 2 10

8 1 HEALTH CARE FINANCING REVIEW SPRING 1980

The Cost of Living Council in its evaluation of the early part of the ESP program reported that controls on hospital charges shifted the burden of increasing hospital expenses toward cost reimbursement proshygrams such as Medicare and Medicaid and away fromcharge reimbursement payment mechanisms such as private insurance Because Medicare and Medicaid serve mainly the aged and children while charge reimshybursement serves many of the 19 to 64 age group the early ESP regulations tended to shift increasing hospital costs to the aged and those 18 and under This affected the age distribution of hospital care exshypenses

Channels of Payment

PUBLIC CHANNELS

Public funding of health care for all age groups has been shifting from State and local governments to the Federal government In 1965 the main sources of public financing of health care were State and local governments which provided over half of the $79 billion in public money spent for health care Most of these non-Federal public funds were spent for the mid-age group which comprised the largest proportion of persons in non-Federal government psychiatric hospitals By 1970 the State and local share of public health care spending had declined to 35 percent and

by 1978 the share was down to 29 percent The decline in the percentage of health care spending by State and local governments may be traced to two factors the growth of Federal programs which parshytially replaced State and local public assistance spending for medical care and the decrease in populashytions of State and local governmental psychiatric hospitals The Federal share of total public health care spending grew from 48 percent in 1965 to 71 pershycent in 1978 Between 1965 and 1978 inclusively the Federal share grew from 51 percent to 86 percent for the aged from 43 percent to 57 percent for the midshyage group and from 61 percent to 66 percent for pershysons under age 19 The distribution of total personal health spending in 1978 by age group and source of public payment is displayed in Figure 5

In 1965 the Veterans Administration the Departshyment of Defense and workers compensation also proshyvided health caremdashmainly for the mid-age group These programs spent $275 billion and accounted for 35 percent of all public spending in 1965 In 1978 they spent $116 billion but their share of public spending diminished to 17 percent reflecting the rapid growth in Medicare and Medicaid spending Public financing as a percent of all health care funding grew rapidly after the introduction of Medicare and Medicaid in 1966 but more recently appears to have stabilized for all age groups (Table 6) Although public funding of personal health care expenditures continues to grow State and local funding as a percent of total expenshyditures had declined

TABLE 6

Percentage Distribution of Funding for Personal Health Care for Selected Calendar Years 1965 to 1978

Age Group 1978 1977 1970 1970 1965

All Ages Total 1000 1000 1000 1000 1000

Private 613 610 609 659 789 Public 387 390 391 341 211

Federal 277 276 275 222 101 State and Local 110 114 116 120 110

Under age 19 Total 1000 1000 1000 1000 1000

Private 713 715 711 761 845 Public 287 285 285 239 155

Federal 189 187 193 142 94 State and Local 98 98 97 97 61

Ages 19-64 Total 1000 1000 1000 1000 1000

Private 714 712 711 754 808 Public 286 288 289 246 192

Federal 162 160 160 111 83 State and Local 124 128 128 135 110

Ages 65 and Over Total 1000 1000 1000 1000 1000

Private 368 361 355 388 701 Public 632 639 645 612 299

Federal 542 547 547 513 154 State and Local 89 92 98 99 144

HEALTH CARE FINANCING REVIEW SPRING 1980 74

FIGURE 5 Percentage Distribution of Personal Health Care Expenditures by Source of Funds and Age Group

Calendar Year 1978

$986 billion

72

$494 billion

37

9

$199 billion 12

54 71

16 10 19

Under 19 19-64 65 and over

Age Group

Private

State and Local Government

Federal Government

HEALTH CARE FINANCING REVIEW SPRING 1980 7 5

Medicare and Medicaid

Two-thirds of all public financing of health care is provided by Medicare and Medicaid Although Medicare finances health care primarily for aged pershysons Medicaid finances health care for all ages as shown by Table 7

TABLE 7 Percent of Total Personal Health Care

Expenditures Financed by Public Programs 1978

Age Group Medicare Medicaid Other

All ages 148 109 130 Under 19 2 158 127 19-64 32 87 167 65 and Over 441 134 57

Medicare In 1978 Medicare provided 44 percent of all health

care costs for the aged compared to 39 percent in 1970 Part of this increase can be attributed to the risshying proportion of hospital care funded by Medicare Medicare paid 71 percent of hospital care costs in 1970 and 75 percent in 1978 This increase was not due to explicit policy decisions It resulted from changes in the mix of psychiatric and non-psychiatric hospital care Between 1955 and 1978 the average daily census in psychiatric hospitals fell from 677000 patients to 190000 patients the age distribution of the average daily census remained fairly constant Consequently community hospital days grew as a share of total hospital days for the aged This increasshying proportion of more highly reimbursed care has caused the increase in the Medicare share of total hospital care for the aged

The proportion of physician expenses paid by Medicare also has increased This occurred because the Medicare annual deductible increased from $50 to $60 in 1973 but has not changed since despite rapid increases in allowed charges for physicians care Table 8 shows that from 1971 to 1977 the deductible expense for physicians services under Medicare decreased from about 19 percent to 12 percent of all allowed charges

TABLE 8 Physicians Services Percentage Distribution of Reimbursements Coinsurance and Deductibles

Selected Calendar Years 1971-1977

1977

Percent

Allowed Charges 1000

Reimbursement 707Coinsurance 177Deductible 116Source Unpublished HCFA data

Medicaid

Medicaid pays a significant part of hospital and physician care costs for persons under age 19 In 1977 about a fourth of all hospital spending and about one dollar of every eight spent for physician care for this group was financed by Medicaid (Table 9) Medicaid paid 39 percent of nursing home costs for persons aged 65 and over in 1978 It appears that the proportion of nursing home care costs paid by Medicaid and Medicare has been decreasing in recent years

In 1978 the program spent $86 billion for persons aged 19 to 64 which represented 47 percent of total Medicaid expenditures Two groups of Medicaid recishypients in this mid-age range accounted for most of these expenditures disabled persons under age 65 who comprised about one-ninth of all Medicaid recishypients but for whom about one-fifth of all Medicaid expenditures were made and adults in families with dependent children who comprised about one-fifth of all Medicaid recipients and for whom about one-sixth of all Medicaid expenditures were made

197(5 1972 1971

Percent Percent Percent

1000 1000 1000

688 175 127

655 164 181

650 162 188

THE INTERACTION OF PRIVATE AND PUBLIC CHANNELS

Direct or out-of-pocket payments and private inshysurance financed most health care costs for younger age groups while public monies dominated funding for aged persons Major channels of payment for all age groups in 1977 are shown in Table 9 by selected types of medical care

Hospitals were the major recipients of public and private funding for health care receiving 34 percent of private funds and 63 percent of public funds The changing structure of source of payment for hospital care is an important determinant of public and private health care funding policy Although no comprehenshysive survey of sources of payment for hospital care by age group is available data from various public and private sources may be merged to estimate the flow of funds by age group in the hospital industry Table 10 represents this flow of funds for the years 1970 and 1977 Medicare provided an increasing share of

HEALTH CARE FINANCING REVIEWSPRING 1980 76

FIGURE 6 Per Capita Personal Health Care Expenditures for the Aged

by Source of Funds and by Type of Care Calendar Year 1978

$2026

Private $746

Other Public $115|

Programs

Medicaid $271

$869

$109 $792

Medicaid $81

-$31

$490

Medicare $893

$366

$648 $149 $30

Medicare $3

-$11 $230

$2031

bull$42

Total Hospital Physicians All Other Care Services

HEALTH CARE FINANCING REVIEW SPRING 1980 7 7

TABLE 9

Percentage Distribution of Health Care Expenditures by Channels of Payment for Hospital Care Physicians Services and All Other Health Care Services Calendar Year 1977

Private Public

Private Direct Health

Age Group Total Total Payments Insurance Other Total Medicare Medicaid Other

All Personal Health Care All Ages 1000 610 318 279 13 390 146 112 132 Under 19 1000 715 381 327 7 285 1 156 128 19-64 1000 712 319 374 19 288 30 89 169 65 and Over 1000 361 291 66 4 639 442 138 59

Hospital Care All Ages 1000 456 83 362 11 544 239 95 210 Under 19 1000 546 37 507 2 454 mdash 250 204 19-64 1000 592 107 469 16 408 49 96 263 65 and Over 1000 120 46 71 3 880 747 39 94

Physician Care All Ages 1000 741 339 401 1 259 147 60 52 Under 19 1000 844 387 457 mdash 156 4 121 31 19-64 1000 845 357 486 1 155 24 56 75 65 and Over 1000 418 262 155 mdash 582 542 31 9

All Other Care All Ages 1000 739 625 90 24 261 19 167 75 Under 19 1000 785 702 69 15 215 - 92 123 19-64 1000 812 634 140 38 188 2 102 84 65 and Over 1000 606 580 19 7 394 53 299 42

community and related hospital spending and private insurance declined due to the extension of Medicare coverage to certain disabled persons under age 65

The proportion of hospital spending for the aged paid by Medicare decreased slightly over the period According to Medicare actuaries more than a million persons aged 65 and over are ineligible for hospital inshysurance under Medicare These persons are predominantly retired government employees whose private insurance continues at retirement and covers most of their physician and hospital care

DIRECT PAYMENTS BY PERSONS AGED 65 AND OVER

Out-of-pocket payments for health care continue to be a major expense for aged persons In 1977 pershysons aged 65 and over paid 29 percent of their health care costs out-of-pocket The amounts paid out-ofshypocket vary considerably by the type of care provided

The out-of-pocket liability of the elderly for hospital care has changed dramatically since 1965mdashthe year before Medicare and Medicaid began About 13 pershycent of spending for hospital care was paid out-ofshypocket in 1965 compared to less than five percent by 1977

The elderly make out-of-pocket payments for physishycians care for that part of the deductible and coinshysurance not paid by Medicaid or private insurance for physicians charges not allowed by Medicare but colshylectable from beneficiaries and for medical services not covered by Medicare Physicians billings to pashytients for charges denied by Medicare because the charges exceed the allowed amounts add a signifishycant amount to patients liabilities generally not covered by private insurance Through 1976 the percentage of total physicians charges paid by Medicare declined because of the growing obligations of Medicare beneficiaries for physicians charges on unassigned claims that were submitted by physishycians but disallowed These disallowed charges to beneficiaries increased from two percent of the total physician bill for the aged in fiscal year 1968 to about 10 percent in calendar year 1976 where they remained through 1978 In dollar terms these out-of-pocket exshypenses for physicians services were about $84 per capita in 1977 and preliminary estimates indicate that the costs will rise to about $96 per capita in 1978

Payment for nursing home care represents the largest health care liability for persons aged 65 and overmdashestimated at $271 per capita in 1978 up from $228 in 1977 and $109 in 1970 About 52 percent of nursing home care was financed out-of-pocket by beneficiaries in 1978

HEALTH CARE FINANCING REVIEW SPRING 1980 78

TABLE 10

Hospital Expenditures and Percentage Distribution of Channels of Payment by Type of Hospital and Age Group Calendar Years 1970 and 1977 (Dollar amounts In millions)

1977 1970

65 and 65 and Total Under 19 19-64 Over Total Under 19 19-64 Over

Psychiatric Hospitals (non-Federal) $4015 $199 $2632 $1184 $2534 $81 $1710 $744 State and Local Hospitals

Sources of Payment-Total 1000 100-0 1000 1000 1000 1000 1000 1000 Medicare 17 mdash 4 49 5 mdash mdash 16 Medicaid 187 347 153 236 110 37 5 359 Other Federal 15 70 15 5 15 99 15 5 Other State and Local 446 85 465 465 701 741 791 489 Private Health Insurance 140 412 180 6 10 37 12 1 Direct Payment 195 85 183 239 159 86 176 129

Private Hospitals $661 $33 $433 $195 $258 $8 $174 $76

Sources of Payment-Total 1000 1000 1000 1000 1000 1000_ 1000 1000 Medicare 17 - 5 46 35 mdash mdash 118 Other State and Local 11 30 12 5 19 mdash 29 mdash Private Health Insurance 700 848 774 508 481 375 483 487 Philanthropy 39 30 39 41 39 125 34 39 Direct Payments 234 91 171 400 426 500 454 355

Federal Hospitals $6099 $747 $4595 $757 $2822 $499 $2025 $349

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Veterans Administration 586 - 636 856 533 mdash 599 828 Department of Defense 322 631 312 83 380 835 328 92 Other 92 369 52 61 88 165 73 80

Other Hospitals $57139 $5572 $34806 $16761 $22184 $2901 $13397 $5885

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Medicare 282 1 60 838 223 mdash - 842 Medicaid 99 281 105 27 88 169 99 23 Workers Compensation 23 mdash 37 2 23 mdash 38 3 State and Local Public Assistance 7 3 11 2 9 11 11 2 Other State and Local 59 13 86 19 70 95 87 19 Department of Defense 7 18 9 1 11 30 11 1 Other Government Programs 15 66 10 6 9 23 10 1 Philanthropy 12 3 19 2 15 5 19 10 Private Health Insurance 412 576 548 76 444 588 585 54 Direct Payments 83 40 115 28 107 80 140 44

Payments for drugs and drug sundries and for denshytists services are another major expense Precise dollar amounts for these payments are not currently available although surveys now under way will proshyvide estimates of out-of-pocket expenses for these types of care as well as for other health services Out-of-pocket spending for drugs and dentists sershyvices is estimated at $150 per capita in 1977 and $160 in 1978

Medicare Supplementary Medical Insurance (SMI) and private health insurance premiums are also paid out-of-pocket at a rate of $78 per capita for SMI and $90 per capita for private health insurance Persons aged 65 and over paid an average of about $698 for health related services and items out-of-pocket in 1977mdashrepresenting 12 percent of their $5900 average income

Conclusions Spending for health care varies significantly by age

group Per capita health spending increases steadily with age for most health care sectors

Young persons are spending a decreasing share of the health dollar because they are declining as a pershycent of the total population Private sources of payshyment provide most of the health expenses for the young

The middle age group spends most of the health care dollar because it is the largest age group Most health expenses for this group are paid by private sources

Persons aged 65 and over continue to increase steadily as a percent of the total population The health care needs of these persons shown by current use of various sectors of health care are expected to

HEALTH CARE FINANCING REVIEW SPRING 1980 79

grow along with their numbers resulting in an inshycreasing share of personal health care spending for and by the elderly Public financing has been and conshytinues to be the major source of funding for personal health care costs for the aged As the aged populashytion continues to grow in the future the need for public financing of health care costs is expected to increase especially for those types of care which aged persons use more oftenmdashhospital care physishycians services and nursing home care The populashytion within the age group 65 and over is aging and is expected to add to the need for health care services especially nursing home care Health care policy and financing must continue to cope with these trends which are expected to continue for many years to come

AcknowledgmentsThe author is indebted to Mary E Rieder Acting Director

of the Division of National Cost Estimates to members of the Division of National Cost Estimates and Intern Karen Young for their comments and suggestions and to Joanie Henderson and Ann Leake for secretarial assistance

Technical Note A

CONCEPTS AND DEFINITIONS

All estimates in this report relate to personal health care expendituresmdashthat portion of the total national health care expense representing health services and supplies received directly by individuals They make up total national expenditures for health together with spending for research and medical facilities conshystruction identifiable administrative costs of governshyment programs government public health activities expenses incurred by philanthropic organizations in raising funds for health care and the net costs of private health insurance (the difference between premiums and benefit payments)

All expenditures for health care that are channeled through any program established by public law are treated as public expenditures in these estimates Exshypenditures under workers compensation programs for example are included with government expenshyditures although they involve benefits paid by private insurers from premiums collected from private sources

Funds disbursed by public programs are reported as program expenditures even for example when they include significant private contributions made by beneficiaries as in the Supplementary Medical Inshysurance (SMI) program The benefit expenditures reported in this series are not adjusted to eliminate the duplication that exists when payments are made by State governments into the Medicare trust fund in the form of SMI premiums for public assistance and Supplemental Security Income (SSI) recipients and they are reported as Medicaid expenditures The amount paid by Medicaid as premiums in 1978 was $288 million for all beneficiaries that portion not reshytained in the trust fund is duplicated as a Medicare expense The amount does not noticeably affect the relationships that are reported

Health expenditures by State and local governshyments that involve funds received from the Federal government under revenue sharing are reported as State and local expenditures not as Federal expenshyditures These funds amounted to $232 million in the first half of fiscal year 1976 the latest period for which data are available No information is available on the use of such funds by specific programs

Responsibility for compiling estimates of national health care spending now resides with the Health Care Financing Administration (HCFA) Department of Health and Human Services Definitions of the various types of health care and descriptions of the public programs are contained in the various articles in the series carrying estimates for expenditures (Gibson 1979 Carroll 1979)

It should be noted that hospital care includes all exshypenditures for care in hospitalsmdashboth inpatient and outpatient The data cover all services and supplies provided

Population estimates used here are selected to corshyrespond to the population covered by expenditure estimates Since national health expenditures cover all spending for or by United States citizens and residents population estimates include the institushytionalized population the Armed Forces (both in the United States and overseas) Federal civilian employees overseas and the civilian population of outlying areas

The group under age 19 presents some problems in connection with the available demographic informashytion on utilization and expenditures Extensive intershypolation is often required to estimate certain types of expenditures for this group Because of the nature of some data sources expenses for certain persons under age 19 who are part of the labor force are not separable from those aged 19 to 64 and expenses of dependent children over age 18 are included with those of the younger group

Technical Note B

The Health Interview Survey (HIS) which provided the data for Table 2 continuously samples members of households It was not intended to obtain complete information on the deceased nor on the six percent of the aged population who are institutionalized Thus Table 2 tends to underestimate the volume of services used by the aged The degree of this underestimation can be evaluated by comparing the statistics in Table 2 to other data A 1973 study (the latest available) determined that six percent of the aged population is institutionalized in psychiatric and long-stay hospitals or nursing homes Institutionalized persons had more frequent admissions and a longer average length of stay than did the noninstitutionalized elderly [Deacon 1977] This study also determined that the institushytionalized elderly used 25 times more physician sershyvices and twice as many drug prescriptions per capita than did their noninstitutionalized counterparts Thus Table 2 significantly underestimates hospital use by the elderly

HEALTH CARE FINANCING REVIEWSPRING 1980 80

It is also necessary to evaluate peoples health exshypenditures in the year of their death to assess the underestimate of the values in Table 2 The Health Inshyterview Survey captures only about half of the health care use of persons dying in the survey year The following table presents the disproportionate share of Medicare dollars spent for aged persons who died in 1976

Technical Note C

Table A Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Years 197819771976 19701965

Table B Estimated Personal Health Care Expenshyditures under Public Programs by Type of Expenditure and Source of Funds for Three Age Groups for Calendar Years 19781977 1976 1970 1965

Table C Expenditures for Health Services and Supshyplies under Public Programs by Program for Three Age Groups for Calendar Years 1978 19771976 1970 1965

Table D Estimated Amount and Percentage Distribution of Personal Health Care Exshypenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 197819771976 1970 1965

Distribution of Medicare Expenditures for Persons Who Died in 1976

Percent of Medicare Percent of Total Recipients Who Died Medicare Dollars

Age Group in 1976 Spent for Those Recipients

All ages 65 and Over 79 207

65-69 40 15370-74 58 18575-79 80 20380-84 118 24985 and Over 198 321

Source Unpublished HCFA data

TABLE A

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1978

All Ages Under 19 19-64 65 and Over

Type of Expenditure Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate amount (in millions)

Total $167911 $102870 $65042 $19875 $14180 $5696 $98668 $70497 $28172 $49366 $18192 $31175

Hospital Care 76025 35107 40919 7070 3835 3235 47785 28626 19159 21169 2645 18524 PhysiciansServices 35250 25811 9439 5215 4382 833 21124 17808 3316 8910 3620 5290 Dentists Services 13300 12761 539 2780 2546 234 9137 8876 261 1383 1338 45 Other Professional Services 4275 3303 972 398 193 205 2787 2480 307 1090 631 459 Drugs and Drug Sundries 15098 13798 1300 2823 2650 173 9044 8419 625 3231 2728 503 Eyeglasses and Appliances 3879 3522 357 481 459 22 2793 2659 134 605 405 201 Nursing-Home Care 15751 7394 8358 68 1 67 3057 600 2457 12624 6790 5834 Other Health Services 4333 1175 3158 1040 113 927 2941 1028 1913 354 35 319

Per Capita Amount Total $75298 $46131 $29167 $28607 $20410 $8199 $76396 $54584 $21813 $202619 $74668 $127955

Hospital Care 34093 15743 18350 10176 5520 4656 36998 22164 14834 86886 10856 76030 PhysiciansServices 15808 11575 4233 7506 6307 1199 16356 13788 2567 36570 14858 21712 DentistsServices 5964 5723 242 4001 3665 337 7075 6872 202 5676 5492 185 Other Professional Services 1917 1481 436 573 278 295 2158 1920 238 4474 2590 1884 Drugs and Drug Sundries 6770 6187 583 4063 3814 249 7002 6519 484 13261 11197 2064 Eyeglasses and Appliances 1740 1579 160 692 661 32 2162 2059 104 2483 1662 825 Nursing-Home Care 7064 3316 3748 100 01 96 2367 465 1902 51814 27869 23945 Other Health Services 1943 527 1416 1497 163 1334 2277 796 1481 1453 144 1310

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 453 341 629 356 270 568 484 406 680 429 145 594 PhysiciansServices 210 251 145 262 309 146 214 253 118 180 199 170 Dentists Services 79 124 8 140 180 41 93 126 9 28 74 1 Other Professional Services 25 32 15 20 14 36 28 35 11 22 35 15 Drugs and Drug Sundries 90 134 20 142 187 30 92 119 22 65 150 16 Eyeglasses and Appliances 23 34 5 24 32 4 28 38 5 12 22 6 Nursing-Home Care 94 72 129 3 mdash 12 31 9 87 256 373 187 Other Health Services 26 11 49 52 8 163 30 15 68 7 2 10

8 1 HEALTH CARE FINANCING REVIEW SPRING 1980

FIGURE 5 Percentage Distribution of Personal Health Care Expenditures by Source of Funds and Age Group

Calendar Year 1978

$986 billion

72

$494 billion

37

9

$199 billion 12

54 71

16 10 19

Under 19 19-64 65 and over

Age Group

Private

State and Local Government

Federal Government

HEALTH CARE FINANCING REVIEW SPRING 1980 7 5

Medicare and Medicaid

Two-thirds of all public financing of health care is provided by Medicare and Medicaid Although Medicare finances health care primarily for aged pershysons Medicaid finances health care for all ages as shown by Table 7

TABLE 7 Percent of Total Personal Health Care

Expenditures Financed by Public Programs 1978

Age Group Medicare Medicaid Other

All ages 148 109 130 Under 19 2 158 127 19-64 32 87 167 65 and Over 441 134 57

Medicare In 1978 Medicare provided 44 percent of all health

care costs for the aged compared to 39 percent in 1970 Part of this increase can be attributed to the risshying proportion of hospital care funded by Medicare Medicare paid 71 percent of hospital care costs in 1970 and 75 percent in 1978 This increase was not due to explicit policy decisions It resulted from changes in the mix of psychiatric and non-psychiatric hospital care Between 1955 and 1978 the average daily census in psychiatric hospitals fell from 677000 patients to 190000 patients the age distribution of the average daily census remained fairly constant Consequently community hospital days grew as a share of total hospital days for the aged This increasshying proportion of more highly reimbursed care has caused the increase in the Medicare share of total hospital care for the aged

The proportion of physician expenses paid by Medicare also has increased This occurred because the Medicare annual deductible increased from $50 to $60 in 1973 but has not changed since despite rapid increases in allowed charges for physicians care Table 8 shows that from 1971 to 1977 the deductible expense for physicians services under Medicare decreased from about 19 percent to 12 percent of all allowed charges

TABLE 8 Physicians Services Percentage Distribution of Reimbursements Coinsurance and Deductibles

Selected Calendar Years 1971-1977

1977

Percent

Allowed Charges 1000

Reimbursement 707Coinsurance 177Deductible 116Source Unpublished HCFA data

Medicaid

Medicaid pays a significant part of hospital and physician care costs for persons under age 19 In 1977 about a fourth of all hospital spending and about one dollar of every eight spent for physician care for this group was financed by Medicaid (Table 9) Medicaid paid 39 percent of nursing home costs for persons aged 65 and over in 1978 It appears that the proportion of nursing home care costs paid by Medicaid and Medicare has been decreasing in recent years

In 1978 the program spent $86 billion for persons aged 19 to 64 which represented 47 percent of total Medicaid expenditures Two groups of Medicaid recishypients in this mid-age range accounted for most of these expenditures disabled persons under age 65 who comprised about one-ninth of all Medicaid recishypients but for whom about one-fifth of all Medicaid expenditures were made and adults in families with dependent children who comprised about one-fifth of all Medicaid recipients and for whom about one-sixth of all Medicaid expenditures were made

197(5 1972 1971

Percent Percent Percent

1000 1000 1000

688 175 127

655 164 181

650 162 188

THE INTERACTION OF PRIVATE AND PUBLIC CHANNELS

Direct or out-of-pocket payments and private inshysurance financed most health care costs for younger age groups while public monies dominated funding for aged persons Major channels of payment for all age groups in 1977 are shown in Table 9 by selected types of medical care

Hospitals were the major recipients of public and private funding for health care receiving 34 percent of private funds and 63 percent of public funds The changing structure of source of payment for hospital care is an important determinant of public and private health care funding policy Although no comprehenshysive survey of sources of payment for hospital care by age group is available data from various public and private sources may be merged to estimate the flow of funds by age group in the hospital industry Table 10 represents this flow of funds for the years 1970 and 1977 Medicare provided an increasing share of

HEALTH CARE FINANCING REVIEWSPRING 1980 76

FIGURE 6 Per Capita Personal Health Care Expenditures for the Aged

by Source of Funds and by Type of Care Calendar Year 1978

$2026

Private $746

Other Public $115|

Programs

Medicaid $271

$869

$109 $792

Medicaid $81

-$31

$490

Medicare $893

$366

$648 $149 $30

Medicare $3

-$11 $230

$2031

bull$42

Total Hospital Physicians All Other Care Services

HEALTH CARE FINANCING REVIEW SPRING 1980 7 7

TABLE 9

Percentage Distribution of Health Care Expenditures by Channels of Payment for Hospital Care Physicians Services and All Other Health Care Services Calendar Year 1977

Private Public

Private Direct Health

Age Group Total Total Payments Insurance Other Total Medicare Medicaid Other

All Personal Health Care All Ages 1000 610 318 279 13 390 146 112 132 Under 19 1000 715 381 327 7 285 1 156 128 19-64 1000 712 319 374 19 288 30 89 169 65 and Over 1000 361 291 66 4 639 442 138 59

Hospital Care All Ages 1000 456 83 362 11 544 239 95 210 Under 19 1000 546 37 507 2 454 mdash 250 204 19-64 1000 592 107 469 16 408 49 96 263 65 and Over 1000 120 46 71 3 880 747 39 94

Physician Care All Ages 1000 741 339 401 1 259 147 60 52 Under 19 1000 844 387 457 mdash 156 4 121 31 19-64 1000 845 357 486 1 155 24 56 75 65 and Over 1000 418 262 155 mdash 582 542 31 9

All Other Care All Ages 1000 739 625 90 24 261 19 167 75 Under 19 1000 785 702 69 15 215 - 92 123 19-64 1000 812 634 140 38 188 2 102 84 65 and Over 1000 606 580 19 7 394 53 299 42

community and related hospital spending and private insurance declined due to the extension of Medicare coverage to certain disabled persons under age 65

The proportion of hospital spending for the aged paid by Medicare decreased slightly over the period According to Medicare actuaries more than a million persons aged 65 and over are ineligible for hospital inshysurance under Medicare These persons are predominantly retired government employees whose private insurance continues at retirement and covers most of their physician and hospital care

DIRECT PAYMENTS BY PERSONS AGED 65 AND OVER

Out-of-pocket payments for health care continue to be a major expense for aged persons In 1977 pershysons aged 65 and over paid 29 percent of their health care costs out-of-pocket The amounts paid out-ofshypocket vary considerably by the type of care provided

The out-of-pocket liability of the elderly for hospital care has changed dramatically since 1965mdashthe year before Medicare and Medicaid began About 13 pershycent of spending for hospital care was paid out-ofshypocket in 1965 compared to less than five percent by 1977

The elderly make out-of-pocket payments for physishycians care for that part of the deductible and coinshysurance not paid by Medicaid or private insurance for physicians charges not allowed by Medicare but colshylectable from beneficiaries and for medical services not covered by Medicare Physicians billings to pashytients for charges denied by Medicare because the charges exceed the allowed amounts add a signifishycant amount to patients liabilities generally not covered by private insurance Through 1976 the percentage of total physicians charges paid by Medicare declined because of the growing obligations of Medicare beneficiaries for physicians charges on unassigned claims that were submitted by physishycians but disallowed These disallowed charges to beneficiaries increased from two percent of the total physician bill for the aged in fiscal year 1968 to about 10 percent in calendar year 1976 where they remained through 1978 In dollar terms these out-of-pocket exshypenses for physicians services were about $84 per capita in 1977 and preliminary estimates indicate that the costs will rise to about $96 per capita in 1978

Payment for nursing home care represents the largest health care liability for persons aged 65 and overmdashestimated at $271 per capita in 1978 up from $228 in 1977 and $109 in 1970 About 52 percent of nursing home care was financed out-of-pocket by beneficiaries in 1978

HEALTH CARE FINANCING REVIEW SPRING 1980 78

TABLE 10

Hospital Expenditures and Percentage Distribution of Channels of Payment by Type of Hospital and Age Group Calendar Years 1970 and 1977 (Dollar amounts In millions)

1977 1970

65 and 65 and Total Under 19 19-64 Over Total Under 19 19-64 Over

Psychiatric Hospitals (non-Federal) $4015 $199 $2632 $1184 $2534 $81 $1710 $744 State and Local Hospitals

Sources of Payment-Total 1000 100-0 1000 1000 1000 1000 1000 1000 Medicare 17 mdash 4 49 5 mdash mdash 16 Medicaid 187 347 153 236 110 37 5 359 Other Federal 15 70 15 5 15 99 15 5 Other State and Local 446 85 465 465 701 741 791 489 Private Health Insurance 140 412 180 6 10 37 12 1 Direct Payment 195 85 183 239 159 86 176 129

Private Hospitals $661 $33 $433 $195 $258 $8 $174 $76

Sources of Payment-Total 1000 1000 1000 1000 1000 1000_ 1000 1000 Medicare 17 - 5 46 35 mdash mdash 118 Other State and Local 11 30 12 5 19 mdash 29 mdash Private Health Insurance 700 848 774 508 481 375 483 487 Philanthropy 39 30 39 41 39 125 34 39 Direct Payments 234 91 171 400 426 500 454 355

Federal Hospitals $6099 $747 $4595 $757 $2822 $499 $2025 $349

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Veterans Administration 586 - 636 856 533 mdash 599 828 Department of Defense 322 631 312 83 380 835 328 92 Other 92 369 52 61 88 165 73 80

Other Hospitals $57139 $5572 $34806 $16761 $22184 $2901 $13397 $5885

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Medicare 282 1 60 838 223 mdash - 842 Medicaid 99 281 105 27 88 169 99 23 Workers Compensation 23 mdash 37 2 23 mdash 38 3 State and Local Public Assistance 7 3 11 2 9 11 11 2 Other State and Local 59 13 86 19 70 95 87 19 Department of Defense 7 18 9 1 11 30 11 1 Other Government Programs 15 66 10 6 9 23 10 1 Philanthropy 12 3 19 2 15 5 19 10 Private Health Insurance 412 576 548 76 444 588 585 54 Direct Payments 83 40 115 28 107 80 140 44

Payments for drugs and drug sundries and for denshytists services are another major expense Precise dollar amounts for these payments are not currently available although surveys now under way will proshyvide estimates of out-of-pocket expenses for these types of care as well as for other health services Out-of-pocket spending for drugs and dentists sershyvices is estimated at $150 per capita in 1977 and $160 in 1978

Medicare Supplementary Medical Insurance (SMI) and private health insurance premiums are also paid out-of-pocket at a rate of $78 per capita for SMI and $90 per capita for private health insurance Persons aged 65 and over paid an average of about $698 for health related services and items out-of-pocket in 1977mdashrepresenting 12 percent of their $5900 average income

Conclusions Spending for health care varies significantly by age

group Per capita health spending increases steadily with age for most health care sectors

Young persons are spending a decreasing share of the health dollar because they are declining as a pershycent of the total population Private sources of payshyment provide most of the health expenses for the young

The middle age group spends most of the health care dollar because it is the largest age group Most health expenses for this group are paid by private sources

Persons aged 65 and over continue to increase steadily as a percent of the total population The health care needs of these persons shown by current use of various sectors of health care are expected to

HEALTH CARE FINANCING REVIEW SPRING 1980 79

grow along with their numbers resulting in an inshycreasing share of personal health care spending for and by the elderly Public financing has been and conshytinues to be the major source of funding for personal health care costs for the aged As the aged populashytion continues to grow in the future the need for public financing of health care costs is expected to increase especially for those types of care which aged persons use more oftenmdashhospital care physishycians services and nursing home care The populashytion within the age group 65 and over is aging and is expected to add to the need for health care services especially nursing home care Health care policy and financing must continue to cope with these trends which are expected to continue for many years to come

AcknowledgmentsThe author is indebted to Mary E Rieder Acting Director

of the Division of National Cost Estimates to members of the Division of National Cost Estimates and Intern Karen Young for their comments and suggestions and to Joanie Henderson and Ann Leake for secretarial assistance

Technical Note A

CONCEPTS AND DEFINITIONS

All estimates in this report relate to personal health care expendituresmdashthat portion of the total national health care expense representing health services and supplies received directly by individuals They make up total national expenditures for health together with spending for research and medical facilities conshystruction identifiable administrative costs of governshyment programs government public health activities expenses incurred by philanthropic organizations in raising funds for health care and the net costs of private health insurance (the difference between premiums and benefit payments)

All expenditures for health care that are channeled through any program established by public law are treated as public expenditures in these estimates Exshypenditures under workers compensation programs for example are included with government expenshyditures although they involve benefits paid by private insurers from premiums collected from private sources

Funds disbursed by public programs are reported as program expenditures even for example when they include significant private contributions made by beneficiaries as in the Supplementary Medical Inshysurance (SMI) program The benefit expenditures reported in this series are not adjusted to eliminate the duplication that exists when payments are made by State governments into the Medicare trust fund in the form of SMI premiums for public assistance and Supplemental Security Income (SSI) recipients and they are reported as Medicaid expenditures The amount paid by Medicaid as premiums in 1978 was $288 million for all beneficiaries that portion not reshytained in the trust fund is duplicated as a Medicare expense The amount does not noticeably affect the relationships that are reported

Health expenditures by State and local governshyments that involve funds received from the Federal government under revenue sharing are reported as State and local expenditures not as Federal expenshyditures These funds amounted to $232 million in the first half of fiscal year 1976 the latest period for which data are available No information is available on the use of such funds by specific programs

Responsibility for compiling estimates of national health care spending now resides with the Health Care Financing Administration (HCFA) Department of Health and Human Services Definitions of the various types of health care and descriptions of the public programs are contained in the various articles in the series carrying estimates for expenditures (Gibson 1979 Carroll 1979)

It should be noted that hospital care includes all exshypenditures for care in hospitalsmdashboth inpatient and outpatient The data cover all services and supplies provided

Population estimates used here are selected to corshyrespond to the population covered by expenditure estimates Since national health expenditures cover all spending for or by United States citizens and residents population estimates include the institushytionalized population the Armed Forces (both in the United States and overseas) Federal civilian employees overseas and the civilian population of outlying areas

The group under age 19 presents some problems in connection with the available demographic informashytion on utilization and expenditures Extensive intershypolation is often required to estimate certain types of expenditures for this group Because of the nature of some data sources expenses for certain persons under age 19 who are part of the labor force are not separable from those aged 19 to 64 and expenses of dependent children over age 18 are included with those of the younger group

Technical Note B

The Health Interview Survey (HIS) which provided the data for Table 2 continuously samples members of households It was not intended to obtain complete information on the deceased nor on the six percent of the aged population who are institutionalized Thus Table 2 tends to underestimate the volume of services used by the aged The degree of this underestimation can be evaluated by comparing the statistics in Table 2 to other data A 1973 study (the latest available) determined that six percent of the aged population is institutionalized in psychiatric and long-stay hospitals or nursing homes Institutionalized persons had more frequent admissions and a longer average length of stay than did the noninstitutionalized elderly [Deacon 1977] This study also determined that the institushytionalized elderly used 25 times more physician sershyvices and twice as many drug prescriptions per capita than did their noninstitutionalized counterparts Thus Table 2 significantly underestimates hospital use by the elderly

HEALTH CARE FINANCING REVIEWSPRING 1980 80

It is also necessary to evaluate peoples health exshypenditures in the year of their death to assess the underestimate of the values in Table 2 The Health Inshyterview Survey captures only about half of the health care use of persons dying in the survey year The following table presents the disproportionate share of Medicare dollars spent for aged persons who died in 1976

Technical Note C

Table A Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Years 197819771976 19701965

Table B Estimated Personal Health Care Expenshyditures under Public Programs by Type of Expenditure and Source of Funds for Three Age Groups for Calendar Years 19781977 1976 1970 1965

Table C Expenditures for Health Services and Supshyplies under Public Programs by Program for Three Age Groups for Calendar Years 1978 19771976 1970 1965

Table D Estimated Amount and Percentage Distribution of Personal Health Care Exshypenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 197819771976 1970 1965

Distribution of Medicare Expenditures for Persons Who Died in 1976

Percent of Medicare Percent of Total Recipients Who Died Medicare Dollars

Age Group in 1976 Spent for Those Recipients

All ages 65 and Over 79 207

65-69 40 15370-74 58 18575-79 80 20380-84 118 24985 and Over 198 321

Source Unpublished HCFA data

TABLE A

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1978

All Ages Under 19 19-64 65 and Over

Type of Expenditure Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate amount (in millions)

Total $167911 $102870 $65042 $19875 $14180 $5696 $98668 $70497 $28172 $49366 $18192 $31175

Hospital Care 76025 35107 40919 7070 3835 3235 47785 28626 19159 21169 2645 18524 PhysiciansServices 35250 25811 9439 5215 4382 833 21124 17808 3316 8910 3620 5290 Dentists Services 13300 12761 539 2780 2546 234 9137 8876 261 1383 1338 45 Other Professional Services 4275 3303 972 398 193 205 2787 2480 307 1090 631 459 Drugs and Drug Sundries 15098 13798 1300 2823 2650 173 9044 8419 625 3231 2728 503 Eyeglasses and Appliances 3879 3522 357 481 459 22 2793 2659 134 605 405 201 Nursing-Home Care 15751 7394 8358 68 1 67 3057 600 2457 12624 6790 5834 Other Health Services 4333 1175 3158 1040 113 927 2941 1028 1913 354 35 319

Per Capita Amount Total $75298 $46131 $29167 $28607 $20410 $8199 $76396 $54584 $21813 $202619 $74668 $127955

Hospital Care 34093 15743 18350 10176 5520 4656 36998 22164 14834 86886 10856 76030 PhysiciansServices 15808 11575 4233 7506 6307 1199 16356 13788 2567 36570 14858 21712 DentistsServices 5964 5723 242 4001 3665 337 7075 6872 202 5676 5492 185 Other Professional Services 1917 1481 436 573 278 295 2158 1920 238 4474 2590 1884 Drugs and Drug Sundries 6770 6187 583 4063 3814 249 7002 6519 484 13261 11197 2064 Eyeglasses and Appliances 1740 1579 160 692 661 32 2162 2059 104 2483 1662 825 Nursing-Home Care 7064 3316 3748 100 01 96 2367 465 1902 51814 27869 23945 Other Health Services 1943 527 1416 1497 163 1334 2277 796 1481 1453 144 1310

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 453 341 629 356 270 568 484 406 680 429 145 594 PhysiciansServices 210 251 145 262 309 146 214 253 118 180 199 170 Dentists Services 79 124 8 140 180 41 93 126 9 28 74 1 Other Professional Services 25 32 15 20 14 36 28 35 11 22 35 15 Drugs and Drug Sundries 90 134 20 142 187 30 92 119 22 65 150 16 Eyeglasses and Appliances 23 34 5 24 32 4 28 38 5 12 22 6 Nursing-Home Care 94 72 129 3 mdash 12 31 9 87 256 373 187 Other Health Services 26 11 49 52 8 163 30 15 68 7 2 10

8 1 HEALTH CARE FINANCING REVIEW SPRING 1980

Medicare and Medicaid

Two-thirds of all public financing of health care is provided by Medicare and Medicaid Although Medicare finances health care primarily for aged pershysons Medicaid finances health care for all ages as shown by Table 7

TABLE 7 Percent of Total Personal Health Care

Expenditures Financed by Public Programs 1978

Age Group Medicare Medicaid Other

All ages 148 109 130 Under 19 2 158 127 19-64 32 87 167 65 and Over 441 134 57

Medicare In 1978 Medicare provided 44 percent of all health

care costs for the aged compared to 39 percent in 1970 Part of this increase can be attributed to the risshying proportion of hospital care funded by Medicare Medicare paid 71 percent of hospital care costs in 1970 and 75 percent in 1978 This increase was not due to explicit policy decisions It resulted from changes in the mix of psychiatric and non-psychiatric hospital care Between 1955 and 1978 the average daily census in psychiatric hospitals fell from 677000 patients to 190000 patients the age distribution of the average daily census remained fairly constant Consequently community hospital days grew as a share of total hospital days for the aged This increasshying proportion of more highly reimbursed care has caused the increase in the Medicare share of total hospital care for the aged

The proportion of physician expenses paid by Medicare also has increased This occurred because the Medicare annual deductible increased from $50 to $60 in 1973 but has not changed since despite rapid increases in allowed charges for physicians care Table 8 shows that from 1971 to 1977 the deductible expense for physicians services under Medicare decreased from about 19 percent to 12 percent of all allowed charges

TABLE 8 Physicians Services Percentage Distribution of Reimbursements Coinsurance and Deductibles

Selected Calendar Years 1971-1977

1977

Percent

Allowed Charges 1000

Reimbursement 707Coinsurance 177Deductible 116Source Unpublished HCFA data

Medicaid

Medicaid pays a significant part of hospital and physician care costs for persons under age 19 In 1977 about a fourth of all hospital spending and about one dollar of every eight spent for physician care for this group was financed by Medicaid (Table 9) Medicaid paid 39 percent of nursing home costs for persons aged 65 and over in 1978 It appears that the proportion of nursing home care costs paid by Medicaid and Medicare has been decreasing in recent years

In 1978 the program spent $86 billion for persons aged 19 to 64 which represented 47 percent of total Medicaid expenditures Two groups of Medicaid recishypients in this mid-age range accounted for most of these expenditures disabled persons under age 65 who comprised about one-ninth of all Medicaid recishypients but for whom about one-fifth of all Medicaid expenditures were made and adults in families with dependent children who comprised about one-fifth of all Medicaid recipients and for whom about one-sixth of all Medicaid expenditures were made

197(5 1972 1971

Percent Percent Percent

1000 1000 1000

688 175 127

655 164 181

650 162 188

THE INTERACTION OF PRIVATE AND PUBLIC CHANNELS

Direct or out-of-pocket payments and private inshysurance financed most health care costs for younger age groups while public monies dominated funding for aged persons Major channels of payment for all age groups in 1977 are shown in Table 9 by selected types of medical care

Hospitals were the major recipients of public and private funding for health care receiving 34 percent of private funds and 63 percent of public funds The changing structure of source of payment for hospital care is an important determinant of public and private health care funding policy Although no comprehenshysive survey of sources of payment for hospital care by age group is available data from various public and private sources may be merged to estimate the flow of funds by age group in the hospital industry Table 10 represents this flow of funds for the years 1970 and 1977 Medicare provided an increasing share of

HEALTH CARE FINANCING REVIEWSPRING 1980 76

FIGURE 6 Per Capita Personal Health Care Expenditures for the Aged

by Source of Funds and by Type of Care Calendar Year 1978

$2026

Private $746

Other Public $115|

Programs

Medicaid $271

$869

$109 $792

Medicaid $81

-$31

$490

Medicare $893

$366

$648 $149 $30

Medicare $3

-$11 $230

$2031

bull$42

Total Hospital Physicians All Other Care Services

HEALTH CARE FINANCING REVIEW SPRING 1980 7 7

TABLE 9

Percentage Distribution of Health Care Expenditures by Channels of Payment for Hospital Care Physicians Services and All Other Health Care Services Calendar Year 1977

Private Public

Private Direct Health

Age Group Total Total Payments Insurance Other Total Medicare Medicaid Other

All Personal Health Care All Ages 1000 610 318 279 13 390 146 112 132 Under 19 1000 715 381 327 7 285 1 156 128 19-64 1000 712 319 374 19 288 30 89 169 65 and Over 1000 361 291 66 4 639 442 138 59

Hospital Care All Ages 1000 456 83 362 11 544 239 95 210 Under 19 1000 546 37 507 2 454 mdash 250 204 19-64 1000 592 107 469 16 408 49 96 263 65 and Over 1000 120 46 71 3 880 747 39 94

Physician Care All Ages 1000 741 339 401 1 259 147 60 52 Under 19 1000 844 387 457 mdash 156 4 121 31 19-64 1000 845 357 486 1 155 24 56 75 65 and Over 1000 418 262 155 mdash 582 542 31 9

All Other Care All Ages 1000 739 625 90 24 261 19 167 75 Under 19 1000 785 702 69 15 215 - 92 123 19-64 1000 812 634 140 38 188 2 102 84 65 and Over 1000 606 580 19 7 394 53 299 42

community and related hospital spending and private insurance declined due to the extension of Medicare coverage to certain disabled persons under age 65

The proportion of hospital spending for the aged paid by Medicare decreased slightly over the period According to Medicare actuaries more than a million persons aged 65 and over are ineligible for hospital inshysurance under Medicare These persons are predominantly retired government employees whose private insurance continues at retirement and covers most of their physician and hospital care

DIRECT PAYMENTS BY PERSONS AGED 65 AND OVER

Out-of-pocket payments for health care continue to be a major expense for aged persons In 1977 pershysons aged 65 and over paid 29 percent of their health care costs out-of-pocket The amounts paid out-ofshypocket vary considerably by the type of care provided

The out-of-pocket liability of the elderly for hospital care has changed dramatically since 1965mdashthe year before Medicare and Medicaid began About 13 pershycent of spending for hospital care was paid out-ofshypocket in 1965 compared to less than five percent by 1977

The elderly make out-of-pocket payments for physishycians care for that part of the deductible and coinshysurance not paid by Medicaid or private insurance for physicians charges not allowed by Medicare but colshylectable from beneficiaries and for medical services not covered by Medicare Physicians billings to pashytients for charges denied by Medicare because the charges exceed the allowed amounts add a signifishycant amount to patients liabilities generally not covered by private insurance Through 1976 the percentage of total physicians charges paid by Medicare declined because of the growing obligations of Medicare beneficiaries for physicians charges on unassigned claims that were submitted by physishycians but disallowed These disallowed charges to beneficiaries increased from two percent of the total physician bill for the aged in fiscal year 1968 to about 10 percent in calendar year 1976 where they remained through 1978 In dollar terms these out-of-pocket exshypenses for physicians services were about $84 per capita in 1977 and preliminary estimates indicate that the costs will rise to about $96 per capita in 1978

Payment for nursing home care represents the largest health care liability for persons aged 65 and overmdashestimated at $271 per capita in 1978 up from $228 in 1977 and $109 in 1970 About 52 percent of nursing home care was financed out-of-pocket by beneficiaries in 1978

HEALTH CARE FINANCING REVIEW SPRING 1980 78

TABLE 10

Hospital Expenditures and Percentage Distribution of Channels of Payment by Type of Hospital and Age Group Calendar Years 1970 and 1977 (Dollar amounts In millions)

1977 1970

65 and 65 and Total Under 19 19-64 Over Total Under 19 19-64 Over

Psychiatric Hospitals (non-Federal) $4015 $199 $2632 $1184 $2534 $81 $1710 $744 State and Local Hospitals

Sources of Payment-Total 1000 100-0 1000 1000 1000 1000 1000 1000 Medicare 17 mdash 4 49 5 mdash mdash 16 Medicaid 187 347 153 236 110 37 5 359 Other Federal 15 70 15 5 15 99 15 5 Other State and Local 446 85 465 465 701 741 791 489 Private Health Insurance 140 412 180 6 10 37 12 1 Direct Payment 195 85 183 239 159 86 176 129

Private Hospitals $661 $33 $433 $195 $258 $8 $174 $76

Sources of Payment-Total 1000 1000 1000 1000 1000 1000_ 1000 1000 Medicare 17 - 5 46 35 mdash mdash 118 Other State and Local 11 30 12 5 19 mdash 29 mdash Private Health Insurance 700 848 774 508 481 375 483 487 Philanthropy 39 30 39 41 39 125 34 39 Direct Payments 234 91 171 400 426 500 454 355

Federal Hospitals $6099 $747 $4595 $757 $2822 $499 $2025 $349

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Veterans Administration 586 - 636 856 533 mdash 599 828 Department of Defense 322 631 312 83 380 835 328 92 Other 92 369 52 61 88 165 73 80

Other Hospitals $57139 $5572 $34806 $16761 $22184 $2901 $13397 $5885

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Medicare 282 1 60 838 223 mdash - 842 Medicaid 99 281 105 27 88 169 99 23 Workers Compensation 23 mdash 37 2 23 mdash 38 3 State and Local Public Assistance 7 3 11 2 9 11 11 2 Other State and Local 59 13 86 19 70 95 87 19 Department of Defense 7 18 9 1 11 30 11 1 Other Government Programs 15 66 10 6 9 23 10 1 Philanthropy 12 3 19 2 15 5 19 10 Private Health Insurance 412 576 548 76 444 588 585 54 Direct Payments 83 40 115 28 107 80 140 44

Payments for drugs and drug sundries and for denshytists services are another major expense Precise dollar amounts for these payments are not currently available although surveys now under way will proshyvide estimates of out-of-pocket expenses for these types of care as well as for other health services Out-of-pocket spending for drugs and dentists sershyvices is estimated at $150 per capita in 1977 and $160 in 1978

Medicare Supplementary Medical Insurance (SMI) and private health insurance premiums are also paid out-of-pocket at a rate of $78 per capita for SMI and $90 per capita for private health insurance Persons aged 65 and over paid an average of about $698 for health related services and items out-of-pocket in 1977mdashrepresenting 12 percent of their $5900 average income

Conclusions Spending for health care varies significantly by age

group Per capita health spending increases steadily with age for most health care sectors

Young persons are spending a decreasing share of the health dollar because they are declining as a pershycent of the total population Private sources of payshyment provide most of the health expenses for the young

The middle age group spends most of the health care dollar because it is the largest age group Most health expenses for this group are paid by private sources

Persons aged 65 and over continue to increase steadily as a percent of the total population The health care needs of these persons shown by current use of various sectors of health care are expected to

HEALTH CARE FINANCING REVIEW SPRING 1980 79

grow along with their numbers resulting in an inshycreasing share of personal health care spending for and by the elderly Public financing has been and conshytinues to be the major source of funding for personal health care costs for the aged As the aged populashytion continues to grow in the future the need for public financing of health care costs is expected to increase especially for those types of care which aged persons use more oftenmdashhospital care physishycians services and nursing home care The populashytion within the age group 65 and over is aging and is expected to add to the need for health care services especially nursing home care Health care policy and financing must continue to cope with these trends which are expected to continue for many years to come

AcknowledgmentsThe author is indebted to Mary E Rieder Acting Director

of the Division of National Cost Estimates to members of the Division of National Cost Estimates and Intern Karen Young for their comments and suggestions and to Joanie Henderson and Ann Leake for secretarial assistance

Technical Note A

CONCEPTS AND DEFINITIONS

All estimates in this report relate to personal health care expendituresmdashthat portion of the total national health care expense representing health services and supplies received directly by individuals They make up total national expenditures for health together with spending for research and medical facilities conshystruction identifiable administrative costs of governshyment programs government public health activities expenses incurred by philanthropic organizations in raising funds for health care and the net costs of private health insurance (the difference between premiums and benefit payments)

All expenditures for health care that are channeled through any program established by public law are treated as public expenditures in these estimates Exshypenditures under workers compensation programs for example are included with government expenshyditures although they involve benefits paid by private insurers from premiums collected from private sources

Funds disbursed by public programs are reported as program expenditures even for example when they include significant private contributions made by beneficiaries as in the Supplementary Medical Inshysurance (SMI) program The benefit expenditures reported in this series are not adjusted to eliminate the duplication that exists when payments are made by State governments into the Medicare trust fund in the form of SMI premiums for public assistance and Supplemental Security Income (SSI) recipients and they are reported as Medicaid expenditures The amount paid by Medicaid as premiums in 1978 was $288 million for all beneficiaries that portion not reshytained in the trust fund is duplicated as a Medicare expense The amount does not noticeably affect the relationships that are reported

Health expenditures by State and local governshyments that involve funds received from the Federal government under revenue sharing are reported as State and local expenditures not as Federal expenshyditures These funds amounted to $232 million in the first half of fiscal year 1976 the latest period for which data are available No information is available on the use of such funds by specific programs

Responsibility for compiling estimates of national health care spending now resides with the Health Care Financing Administration (HCFA) Department of Health and Human Services Definitions of the various types of health care and descriptions of the public programs are contained in the various articles in the series carrying estimates for expenditures (Gibson 1979 Carroll 1979)

It should be noted that hospital care includes all exshypenditures for care in hospitalsmdashboth inpatient and outpatient The data cover all services and supplies provided

Population estimates used here are selected to corshyrespond to the population covered by expenditure estimates Since national health expenditures cover all spending for or by United States citizens and residents population estimates include the institushytionalized population the Armed Forces (both in the United States and overseas) Federal civilian employees overseas and the civilian population of outlying areas

The group under age 19 presents some problems in connection with the available demographic informashytion on utilization and expenditures Extensive intershypolation is often required to estimate certain types of expenditures for this group Because of the nature of some data sources expenses for certain persons under age 19 who are part of the labor force are not separable from those aged 19 to 64 and expenses of dependent children over age 18 are included with those of the younger group

Technical Note B

The Health Interview Survey (HIS) which provided the data for Table 2 continuously samples members of households It was not intended to obtain complete information on the deceased nor on the six percent of the aged population who are institutionalized Thus Table 2 tends to underestimate the volume of services used by the aged The degree of this underestimation can be evaluated by comparing the statistics in Table 2 to other data A 1973 study (the latest available) determined that six percent of the aged population is institutionalized in psychiatric and long-stay hospitals or nursing homes Institutionalized persons had more frequent admissions and a longer average length of stay than did the noninstitutionalized elderly [Deacon 1977] This study also determined that the institushytionalized elderly used 25 times more physician sershyvices and twice as many drug prescriptions per capita than did their noninstitutionalized counterparts Thus Table 2 significantly underestimates hospital use by the elderly

HEALTH CARE FINANCING REVIEWSPRING 1980 80

It is also necessary to evaluate peoples health exshypenditures in the year of their death to assess the underestimate of the values in Table 2 The Health Inshyterview Survey captures only about half of the health care use of persons dying in the survey year The following table presents the disproportionate share of Medicare dollars spent for aged persons who died in 1976

Technical Note C

Table A Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Years 197819771976 19701965

Table B Estimated Personal Health Care Expenshyditures under Public Programs by Type of Expenditure and Source of Funds for Three Age Groups for Calendar Years 19781977 1976 1970 1965

Table C Expenditures for Health Services and Supshyplies under Public Programs by Program for Three Age Groups for Calendar Years 1978 19771976 1970 1965

Table D Estimated Amount and Percentage Distribution of Personal Health Care Exshypenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 197819771976 1970 1965

Distribution of Medicare Expenditures for Persons Who Died in 1976

Percent of Medicare Percent of Total Recipients Who Died Medicare Dollars

Age Group in 1976 Spent for Those Recipients

All ages 65 and Over 79 207

65-69 40 15370-74 58 18575-79 80 20380-84 118 24985 and Over 198 321

Source Unpublished HCFA data

TABLE A

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1978

All Ages Under 19 19-64 65 and Over

Type of Expenditure Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate amount (in millions)

Total $167911 $102870 $65042 $19875 $14180 $5696 $98668 $70497 $28172 $49366 $18192 $31175

Hospital Care 76025 35107 40919 7070 3835 3235 47785 28626 19159 21169 2645 18524 PhysiciansServices 35250 25811 9439 5215 4382 833 21124 17808 3316 8910 3620 5290 Dentists Services 13300 12761 539 2780 2546 234 9137 8876 261 1383 1338 45 Other Professional Services 4275 3303 972 398 193 205 2787 2480 307 1090 631 459 Drugs and Drug Sundries 15098 13798 1300 2823 2650 173 9044 8419 625 3231 2728 503 Eyeglasses and Appliances 3879 3522 357 481 459 22 2793 2659 134 605 405 201 Nursing-Home Care 15751 7394 8358 68 1 67 3057 600 2457 12624 6790 5834 Other Health Services 4333 1175 3158 1040 113 927 2941 1028 1913 354 35 319

Per Capita Amount Total $75298 $46131 $29167 $28607 $20410 $8199 $76396 $54584 $21813 $202619 $74668 $127955

Hospital Care 34093 15743 18350 10176 5520 4656 36998 22164 14834 86886 10856 76030 PhysiciansServices 15808 11575 4233 7506 6307 1199 16356 13788 2567 36570 14858 21712 DentistsServices 5964 5723 242 4001 3665 337 7075 6872 202 5676 5492 185 Other Professional Services 1917 1481 436 573 278 295 2158 1920 238 4474 2590 1884 Drugs and Drug Sundries 6770 6187 583 4063 3814 249 7002 6519 484 13261 11197 2064 Eyeglasses and Appliances 1740 1579 160 692 661 32 2162 2059 104 2483 1662 825 Nursing-Home Care 7064 3316 3748 100 01 96 2367 465 1902 51814 27869 23945 Other Health Services 1943 527 1416 1497 163 1334 2277 796 1481 1453 144 1310

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 453 341 629 356 270 568 484 406 680 429 145 594 PhysiciansServices 210 251 145 262 309 146 214 253 118 180 199 170 Dentists Services 79 124 8 140 180 41 93 126 9 28 74 1 Other Professional Services 25 32 15 20 14 36 28 35 11 22 35 15 Drugs and Drug Sundries 90 134 20 142 187 30 92 119 22 65 150 16 Eyeglasses and Appliances 23 34 5 24 32 4 28 38 5 12 22 6 Nursing-Home Care 94 72 129 3 mdash 12 31 9 87 256 373 187 Other Health Services 26 11 49 52 8 163 30 15 68 7 2 10

8 1 HEALTH CARE FINANCING REVIEW SPRING 1980

FIGURE 6 Per Capita Personal Health Care Expenditures for the Aged

by Source of Funds and by Type of Care Calendar Year 1978

$2026

Private $746

Other Public $115|

Programs

Medicaid $271

$869

$109 $792

Medicaid $81

-$31

$490

Medicare $893

$366

$648 $149 $30

Medicare $3

-$11 $230

$2031

bull$42

Total Hospital Physicians All Other Care Services

HEALTH CARE FINANCING REVIEW SPRING 1980 7 7

TABLE 9

Percentage Distribution of Health Care Expenditures by Channels of Payment for Hospital Care Physicians Services and All Other Health Care Services Calendar Year 1977

Private Public

Private Direct Health

Age Group Total Total Payments Insurance Other Total Medicare Medicaid Other

All Personal Health Care All Ages 1000 610 318 279 13 390 146 112 132 Under 19 1000 715 381 327 7 285 1 156 128 19-64 1000 712 319 374 19 288 30 89 169 65 and Over 1000 361 291 66 4 639 442 138 59

Hospital Care All Ages 1000 456 83 362 11 544 239 95 210 Under 19 1000 546 37 507 2 454 mdash 250 204 19-64 1000 592 107 469 16 408 49 96 263 65 and Over 1000 120 46 71 3 880 747 39 94

Physician Care All Ages 1000 741 339 401 1 259 147 60 52 Under 19 1000 844 387 457 mdash 156 4 121 31 19-64 1000 845 357 486 1 155 24 56 75 65 and Over 1000 418 262 155 mdash 582 542 31 9

All Other Care All Ages 1000 739 625 90 24 261 19 167 75 Under 19 1000 785 702 69 15 215 - 92 123 19-64 1000 812 634 140 38 188 2 102 84 65 and Over 1000 606 580 19 7 394 53 299 42

community and related hospital spending and private insurance declined due to the extension of Medicare coverage to certain disabled persons under age 65

The proportion of hospital spending for the aged paid by Medicare decreased slightly over the period According to Medicare actuaries more than a million persons aged 65 and over are ineligible for hospital inshysurance under Medicare These persons are predominantly retired government employees whose private insurance continues at retirement and covers most of their physician and hospital care

DIRECT PAYMENTS BY PERSONS AGED 65 AND OVER

Out-of-pocket payments for health care continue to be a major expense for aged persons In 1977 pershysons aged 65 and over paid 29 percent of their health care costs out-of-pocket The amounts paid out-ofshypocket vary considerably by the type of care provided

The out-of-pocket liability of the elderly for hospital care has changed dramatically since 1965mdashthe year before Medicare and Medicaid began About 13 pershycent of spending for hospital care was paid out-ofshypocket in 1965 compared to less than five percent by 1977

The elderly make out-of-pocket payments for physishycians care for that part of the deductible and coinshysurance not paid by Medicaid or private insurance for physicians charges not allowed by Medicare but colshylectable from beneficiaries and for medical services not covered by Medicare Physicians billings to pashytients for charges denied by Medicare because the charges exceed the allowed amounts add a signifishycant amount to patients liabilities generally not covered by private insurance Through 1976 the percentage of total physicians charges paid by Medicare declined because of the growing obligations of Medicare beneficiaries for physicians charges on unassigned claims that were submitted by physishycians but disallowed These disallowed charges to beneficiaries increased from two percent of the total physician bill for the aged in fiscal year 1968 to about 10 percent in calendar year 1976 where they remained through 1978 In dollar terms these out-of-pocket exshypenses for physicians services were about $84 per capita in 1977 and preliminary estimates indicate that the costs will rise to about $96 per capita in 1978

Payment for nursing home care represents the largest health care liability for persons aged 65 and overmdashestimated at $271 per capita in 1978 up from $228 in 1977 and $109 in 1970 About 52 percent of nursing home care was financed out-of-pocket by beneficiaries in 1978

HEALTH CARE FINANCING REVIEW SPRING 1980 78

TABLE 10

Hospital Expenditures and Percentage Distribution of Channels of Payment by Type of Hospital and Age Group Calendar Years 1970 and 1977 (Dollar amounts In millions)

1977 1970

65 and 65 and Total Under 19 19-64 Over Total Under 19 19-64 Over

Psychiatric Hospitals (non-Federal) $4015 $199 $2632 $1184 $2534 $81 $1710 $744 State and Local Hospitals

Sources of Payment-Total 1000 100-0 1000 1000 1000 1000 1000 1000 Medicare 17 mdash 4 49 5 mdash mdash 16 Medicaid 187 347 153 236 110 37 5 359 Other Federal 15 70 15 5 15 99 15 5 Other State and Local 446 85 465 465 701 741 791 489 Private Health Insurance 140 412 180 6 10 37 12 1 Direct Payment 195 85 183 239 159 86 176 129

Private Hospitals $661 $33 $433 $195 $258 $8 $174 $76

Sources of Payment-Total 1000 1000 1000 1000 1000 1000_ 1000 1000 Medicare 17 - 5 46 35 mdash mdash 118 Other State and Local 11 30 12 5 19 mdash 29 mdash Private Health Insurance 700 848 774 508 481 375 483 487 Philanthropy 39 30 39 41 39 125 34 39 Direct Payments 234 91 171 400 426 500 454 355

Federal Hospitals $6099 $747 $4595 $757 $2822 $499 $2025 $349

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Veterans Administration 586 - 636 856 533 mdash 599 828 Department of Defense 322 631 312 83 380 835 328 92 Other 92 369 52 61 88 165 73 80

Other Hospitals $57139 $5572 $34806 $16761 $22184 $2901 $13397 $5885

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Medicare 282 1 60 838 223 mdash - 842 Medicaid 99 281 105 27 88 169 99 23 Workers Compensation 23 mdash 37 2 23 mdash 38 3 State and Local Public Assistance 7 3 11 2 9 11 11 2 Other State and Local 59 13 86 19 70 95 87 19 Department of Defense 7 18 9 1 11 30 11 1 Other Government Programs 15 66 10 6 9 23 10 1 Philanthropy 12 3 19 2 15 5 19 10 Private Health Insurance 412 576 548 76 444 588 585 54 Direct Payments 83 40 115 28 107 80 140 44

Payments for drugs and drug sundries and for denshytists services are another major expense Precise dollar amounts for these payments are not currently available although surveys now under way will proshyvide estimates of out-of-pocket expenses for these types of care as well as for other health services Out-of-pocket spending for drugs and dentists sershyvices is estimated at $150 per capita in 1977 and $160 in 1978

Medicare Supplementary Medical Insurance (SMI) and private health insurance premiums are also paid out-of-pocket at a rate of $78 per capita for SMI and $90 per capita for private health insurance Persons aged 65 and over paid an average of about $698 for health related services and items out-of-pocket in 1977mdashrepresenting 12 percent of their $5900 average income

Conclusions Spending for health care varies significantly by age

group Per capita health spending increases steadily with age for most health care sectors

Young persons are spending a decreasing share of the health dollar because they are declining as a pershycent of the total population Private sources of payshyment provide most of the health expenses for the young

The middle age group spends most of the health care dollar because it is the largest age group Most health expenses for this group are paid by private sources

Persons aged 65 and over continue to increase steadily as a percent of the total population The health care needs of these persons shown by current use of various sectors of health care are expected to

HEALTH CARE FINANCING REVIEW SPRING 1980 79

grow along with their numbers resulting in an inshycreasing share of personal health care spending for and by the elderly Public financing has been and conshytinues to be the major source of funding for personal health care costs for the aged As the aged populashytion continues to grow in the future the need for public financing of health care costs is expected to increase especially for those types of care which aged persons use more oftenmdashhospital care physishycians services and nursing home care The populashytion within the age group 65 and over is aging and is expected to add to the need for health care services especially nursing home care Health care policy and financing must continue to cope with these trends which are expected to continue for many years to come

AcknowledgmentsThe author is indebted to Mary E Rieder Acting Director

of the Division of National Cost Estimates to members of the Division of National Cost Estimates and Intern Karen Young for their comments and suggestions and to Joanie Henderson and Ann Leake for secretarial assistance

Technical Note A

CONCEPTS AND DEFINITIONS

All estimates in this report relate to personal health care expendituresmdashthat portion of the total national health care expense representing health services and supplies received directly by individuals They make up total national expenditures for health together with spending for research and medical facilities conshystruction identifiable administrative costs of governshyment programs government public health activities expenses incurred by philanthropic organizations in raising funds for health care and the net costs of private health insurance (the difference between premiums and benefit payments)

All expenditures for health care that are channeled through any program established by public law are treated as public expenditures in these estimates Exshypenditures under workers compensation programs for example are included with government expenshyditures although they involve benefits paid by private insurers from premiums collected from private sources

Funds disbursed by public programs are reported as program expenditures even for example when they include significant private contributions made by beneficiaries as in the Supplementary Medical Inshysurance (SMI) program The benefit expenditures reported in this series are not adjusted to eliminate the duplication that exists when payments are made by State governments into the Medicare trust fund in the form of SMI premiums for public assistance and Supplemental Security Income (SSI) recipients and they are reported as Medicaid expenditures The amount paid by Medicaid as premiums in 1978 was $288 million for all beneficiaries that portion not reshytained in the trust fund is duplicated as a Medicare expense The amount does not noticeably affect the relationships that are reported

Health expenditures by State and local governshyments that involve funds received from the Federal government under revenue sharing are reported as State and local expenditures not as Federal expenshyditures These funds amounted to $232 million in the first half of fiscal year 1976 the latest period for which data are available No information is available on the use of such funds by specific programs

Responsibility for compiling estimates of national health care spending now resides with the Health Care Financing Administration (HCFA) Department of Health and Human Services Definitions of the various types of health care and descriptions of the public programs are contained in the various articles in the series carrying estimates for expenditures (Gibson 1979 Carroll 1979)

It should be noted that hospital care includes all exshypenditures for care in hospitalsmdashboth inpatient and outpatient The data cover all services and supplies provided

Population estimates used here are selected to corshyrespond to the population covered by expenditure estimates Since national health expenditures cover all spending for or by United States citizens and residents population estimates include the institushytionalized population the Armed Forces (both in the United States and overseas) Federal civilian employees overseas and the civilian population of outlying areas

The group under age 19 presents some problems in connection with the available demographic informashytion on utilization and expenditures Extensive intershypolation is often required to estimate certain types of expenditures for this group Because of the nature of some data sources expenses for certain persons under age 19 who are part of the labor force are not separable from those aged 19 to 64 and expenses of dependent children over age 18 are included with those of the younger group

Technical Note B

The Health Interview Survey (HIS) which provided the data for Table 2 continuously samples members of households It was not intended to obtain complete information on the deceased nor on the six percent of the aged population who are institutionalized Thus Table 2 tends to underestimate the volume of services used by the aged The degree of this underestimation can be evaluated by comparing the statistics in Table 2 to other data A 1973 study (the latest available) determined that six percent of the aged population is institutionalized in psychiatric and long-stay hospitals or nursing homes Institutionalized persons had more frequent admissions and a longer average length of stay than did the noninstitutionalized elderly [Deacon 1977] This study also determined that the institushytionalized elderly used 25 times more physician sershyvices and twice as many drug prescriptions per capita than did their noninstitutionalized counterparts Thus Table 2 significantly underestimates hospital use by the elderly

HEALTH CARE FINANCING REVIEWSPRING 1980 80

It is also necessary to evaluate peoples health exshypenditures in the year of their death to assess the underestimate of the values in Table 2 The Health Inshyterview Survey captures only about half of the health care use of persons dying in the survey year The following table presents the disproportionate share of Medicare dollars spent for aged persons who died in 1976

Technical Note C

Table A Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Years 197819771976 19701965

Table B Estimated Personal Health Care Expenshyditures under Public Programs by Type of Expenditure and Source of Funds for Three Age Groups for Calendar Years 19781977 1976 1970 1965

Table C Expenditures for Health Services and Supshyplies under Public Programs by Program for Three Age Groups for Calendar Years 1978 19771976 1970 1965

Table D Estimated Amount and Percentage Distribution of Personal Health Care Exshypenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 197819771976 1970 1965

Distribution of Medicare Expenditures for Persons Who Died in 1976

Percent of Medicare Percent of Total Recipients Who Died Medicare Dollars

Age Group in 1976 Spent for Those Recipients

All ages 65 and Over 79 207

65-69 40 15370-74 58 18575-79 80 20380-84 118 24985 and Over 198 321

Source Unpublished HCFA data

TABLE A

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1978

All Ages Under 19 19-64 65 and Over

Type of Expenditure Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate amount (in millions)

Total $167911 $102870 $65042 $19875 $14180 $5696 $98668 $70497 $28172 $49366 $18192 $31175

Hospital Care 76025 35107 40919 7070 3835 3235 47785 28626 19159 21169 2645 18524 PhysiciansServices 35250 25811 9439 5215 4382 833 21124 17808 3316 8910 3620 5290 Dentists Services 13300 12761 539 2780 2546 234 9137 8876 261 1383 1338 45 Other Professional Services 4275 3303 972 398 193 205 2787 2480 307 1090 631 459 Drugs and Drug Sundries 15098 13798 1300 2823 2650 173 9044 8419 625 3231 2728 503 Eyeglasses and Appliances 3879 3522 357 481 459 22 2793 2659 134 605 405 201 Nursing-Home Care 15751 7394 8358 68 1 67 3057 600 2457 12624 6790 5834 Other Health Services 4333 1175 3158 1040 113 927 2941 1028 1913 354 35 319

Per Capita Amount Total $75298 $46131 $29167 $28607 $20410 $8199 $76396 $54584 $21813 $202619 $74668 $127955

Hospital Care 34093 15743 18350 10176 5520 4656 36998 22164 14834 86886 10856 76030 PhysiciansServices 15808 11575 4233 7506 6307 1199 16356 13788 2567 36570 14858 21712 DentistsServices 5964 5723 242 4001 3665 337 7075 6872 202 5676 5492 185 Other Professional Services 1917 1481 436 573 278 295 2158 1920 238 4474 2590 1884 Drugs and Drug Sundries 6770 6187 583 4063 3814 249 7002 6519 484 13261 11197 2064 Eyeglasses and Appliances 1740 1579 160 692 661 32 2162 2059 104 2483 1662 825 Nursing-Home Care 7064 3316 3748 100 01 96 2367 465 1902 51814 27869 23945 Other Health Services 1943 527 1416 1497 163 1334 2277 796 1481 1453 144 1310

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 453 341 629 356 270 568 484 406 680 429 145 594 PhysiciansServices 210 251 145 262 309 146 214 253 118 180 199 170 Dentists Services 79 124 8 140 180 41 93 126 9 28 74 1 Other Professional Services 25 32 15 20 14 36 28 35 11 22 35 15 Drugs and Drug Sundries 90 134 20 142 187 30 92 119 22 65 150 16 Eyeglasses and Appliances 23 34 5 24 32 4 28 38 5 12 22 6 Nursing-Home Care 94 72 129 3 mdash 12 31 9 87 256 373 187 Other Health Services 26 11 49 52 8 163 30 15 68 7 2 10

8 1 HEALTH CARE FINANCING REVIEW SPRING 1980

TABLE 9

Percentage Distribution of Health Care Expenditures by Channels of Payment for Hospital Care Physicians Services and All Other Health Care Services Calendar Year 1977

Private Public

Private Direct Health

Age Group Total Total Payments Insurance Other Total Medicare Medicaid Other

All Personal Health Care All Ages 1000 610 318 279 13 390 146 112 132 Under 19 1000 715 381 327 7 285 1 156 128 19-64 1000 712 319 374 19 288 30 89 169 65 and Over 1000 361 291 66 4 639 442 138 59

Hospital Care All Ages 1000 456 83 362 11 544 239 95 210 Under 19 1000 546 37 507 2 454 mdash 250 204 19-64 1000 592 107 469 16 408 49 96 263 65 and Over 1000 120 46 71 3 880 747 39 94

Physician Care All Ages 1000 741 339 401 1 259 147 60 52 Under 19 1000 844 387 457 mdash 156 4 121 31 19-64 1000 845 357 486 1 155 24 56 75 65 and Over 1000 418 262 155 mdash 582 542 31 9

All Other Care All Ages 1000 739 625 90 24 261 19 167 75 Under 19 1000 785 702 69 15 215 - 92 123 19-64 1000 812 634 140 38 188 2 102 84 65 and Over 1000 606 580 19 7 394 53 299 42

community and related hospital spending and private insurance declined due to the extension of Medicare coverage to certain disabled persons under age 65

The proportion of hospital spending for the aged paid by Medicare decreased slightly over the period According to Medicare actuaries more than a million persons aged 65 and over are ineligible for hospital inshysurance under Medicare These persons are predominantly retired government employees whose private insurance continues at retirement and covers most of their physician and hospital care

DIRECT PAYMENTS BY PERSONS AGED 65 AND OVER

Out-of-pocket payments for health care continue to be a major expense for aged persons In 1977 pershysons aged 65 and over paid 29 percent of their health care costs out-of-pocket The amounts paid out-ofshypocket vary considerably by the type of care provided

The out-of-pocket liability of the elderly for hospital care has changed dramatically since 1965mdashthe year before Medicare and Medicaid began About 13 pershycent of spending for hospital care was paid out-ofshypocket in 1965 compared to less than five percent by 1977

The elderly make out-of-pocket payments for physishycians care for that part of the deductible and coinshysurance not paid by Medicaid or private insurance for physicians charges not allowed by Medicare but colshylectable from beneficiaries and for medical services not covered by Medicare Physicians billings to pashytients for charges denied by Medicare because the charges exceed the allowed amounts add a signifishycant amount to patients liabilities generally not covered by private insurance Through 1976 the percentage of total physicians charges paid by Medicare declined because of the growing obligations of Medicare beneficiaries for physicians charges on unassigned claims that were submitted by physishycians but disallowed These disallowed charges to beneficiaries increased from two percent of the total physician bill for the aged in fiscal year 1968 to about 10 percent in calendar year 1976 where they remained through 1978 In dollar terms these out-of-pocket exshypenses for physicians services were about $84 per capita in 1977 and preliminary estimates indicate that the costs will rise to about $96 per capita in 1978

Payment for nursing home care represents the largest health care liability for persons aged 65 and overmdashestimated at $271 per capita in 1978 up from $228 in 1977 and $109 in 1970 About 52 percent of nursing home care was financed out-of-pocket by beneficiaries in 1978

HEALTH CARE FINANCING REVIEW SPRING 1980 78

TABLE 10

Hospital Expenditures and Percentage Distribution of Channels of Payment by Type of Hospital and Age Group Calendar Years 1970 and 1977 (Dollar amounts In millions)

1977 1970

65 and 65 and Total Under 19 19-64 Over Total Under 19 19-64 Over

Psychiatric Hospitals (non-Federal) $4015 $199 $2632 $1184 $2534 $81 $1710 $744 State and Local Hospitals

Sources of Payment-Total 1000 100-0 1000 1000 1000 1000 1000 1000 Medicare 17 mdash 4 49 5 mdash mdash 16 Medicaid 187 347 153 236 110 37 5 359 Other Federal 15 70 15 5 15 99 15 5 Other State and Local 446 85 465 465 701 741 791 489 Private Health Insurance 140 412 180 6 10 37 12 1 Direct Payment 195 85 183 239 159 86 176 129

Private Hospitals $661 $33 $433 $195 $258 $8 $174 $76

Sources of Payment-Total 1000 1000 1000 1000 1000 1000_ 1000 1000 Medicare 17 - 5 46 35 mdash mdash 118 Other State and Local 11 30 12 5 19 mdash 29 mdash Private Health Insurance 700 848 774 508 481 375 483 487 Philanthropy 39 30 39 41 39 125 34 39 Direct Payments 234 91 171 400 426 500 454 355

Federal Hospitals $6099 $747 $4595 $757 $2822 $499 $2025 $349

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Veterans Administration 586 - 636 856 533 mdash 599 828 Department of Defense 322 631 312 83 380 835 328 92 Other 92 369 52 61 88 165 73 80

Other Hospitals $57139 $5572 $34806 $16761 $22184 $2901 $13397 $5885

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Medicare 282 1 60 838 223 mdash - 842 Medicaid 99 281 105 27 88 169 99 23 Workers Compensation 23 mdash 37 2 23 mdash 38 3 State and Local Public Assistance 7 3 11 2 9 11 11 2 Other State and Local 59 13 86 19 70 95 87 19 Department of Defense 7 18 9 1 11 30 11 1 Other Government Programs 15 66 10 6 9 23 10 1 Philanthropy 12 3 19 2 15 5 19 10 Private Health Insurance 412 576 548 76 444 588 585 54 Direct Payments 83 40 115 28 107 80 140 44

Payments for drugs and drug sundries and for denshytists services are another major expense Precise dollar amounts for these payments are not currently available although surveys now under way will proshyvide estimates of out-of-pocket expenses for these types of care as well as for other health services Out-of-pocket spending for drugs and dentists sershyvices is estimated at $150 per capita in 1977 and $160 in 1978

Medicare Supplementary Medical Insurance (SMI) and private health insurance premiums are also paid out-of-pocket at a rate of $78 per capita for SMI and $90 per capita for private health insurance Persons aged 65 and over paid an average of about $698 for health related services and items out-of-pocket in 1977mdashrepresenting 12 percent of their $5900 average income

Conclusions Spending for health care varies significantly by age

group Per capita health spending increases steadily with age for most health care sectors

Young persons are spending a decreasing share of the health dollar because they are declining as a pershycent of the total population Private sources of payshyment provide most of the health expenses for the young

The middle age group spends most of the health care dollar because it is the largest age group Most health expenses for this group are paid by private sources

Persons aged 65 and over continue to increase steadily as a percent of the total population The health care needs of these persons shown by current use of various sectors of health care are expected to

HEALTH CARE FINANCING REVIEW SPRING 1980 79

grow along with their numbers resulting in an inshycreasing share of personal health care spending for and by the elderly Public financing has been and conshytinues to be the major source of funding for personal health care costs for the aged As the aged populashytion continues to grow in the future the need for public financing of health care costs is expected to increase especially for those types of care which aged persons use more oftenmdashhospital care physishycians services and nursing home care The populashytion within the age group 65 and over is aging and is expected to add to the need for health care services especially nursing home care Health care policy and financing must continue to cope with these trends which are expected to continue for many years to come

AcknowledgmentsThe author is indebted to Mary E Rieder Acting Director

of the Division of National Cost Estimates to members of the Division of National Cost Estimates and Intern Karen Young for their comments and suggestions and to Joanie Henderson and Ann Leake for secretarial assistance

Technical Note A

CONCEPTS AND DEFINITIONS

All estimates in this report relate to personal health care expendituresmdashthat portion of the total national health care expense representing health services and supplies received directly by individuals They make up total national expenditures for health together with spending for research and medical facilities conshystruction identifiable administrative costs of governshyment programs government public health activities expenses incurred by philanthropic organizations in raising funds for health care and the net costs of private health insurance (the difference between premiums and benefit payments)

All expenditures for health care that are channeled through any program established by public law are treated as public expenditures in these estimates Exshypenditures under workers compensation programs for example are included with government expenshyditures although they involve benefits paid by private insurers from premiums collected from private sources

Funds disbursed by public programs are reported as program expenditures even for example when they include significant private contributions made by beneficiaries as in the Supplementary Medical Inshysurance (SMI) program The benefit expenditures reported in this series are not adjusted to eliminate the duplication that exists when payments are made by State governments into the Medicare trust fund in the form of SMI premiums for public assistance and Supplemental Security Income (SSI) recipients and they are reported as Medicaid expenditures The amount paid by Medicaid as premiums in 1978 was $288 million for all beneficiaries that portion not reshytained in the trust fund is duplicated as a Medicare expense The amount does not noticeably affect the relationships that are reported

Health expenditures by State and local governshyments that involve funds received from the Federal government under revenue sharing are reported as State and local expenditures not as Federal expenshyditures These funds amounted to $232 million in the first half of fiscal year 1976 the latest period for which data are available No information is available on the use of such funds by specific programs

Responsibility for compiling estimates of national health care spending now resides with the Health Care Financing Administration (HCFA) Department of Health and Human Services Definitions of the various types of health care and descriptions of the public programs are contained in the various articles in the series carrying estimates for expenditures (Gibson 1979 Carroll 1979)

It should be noted that hospital care includes all exshypenditures for care in hospitalsmdashboth inpatient and outpatient The data cover all services and supplies provided

Population estimates used here are selected to corshyrespond to the population covered by expenditure estimates Since national health expenditures cover all spending for or by United States citizens and residents population estimates include the institushytionalized population the Armed Forces (both in the United States and overseas) Federal civilian employees overseas and the civilian population of outlying areas

The group under age 19 presents some problems in connection with the available demographic informashytion on utilization and expenditures Extensive intershypolation is often required to estimate certain types of expenditures for this group Because of the nature of some data sources expenses for certain persons under age 19 who are part of the labor force are not separable from those aged 19 to 64 and expenses of dependent children over age 18 are included with those of the younger group

Technical Note B

The Health Interview Survey (HIS) which provided the data for Table 2 continuously samples members of households It was not intended to obtain complete information on the deceased nor on the six percent of the aged population who are institutionalized Thus Table 2 tends to underestimate the volume of services used by the aged The degree of this underestimation can be evaluated by comparing the statistics in Table 2 to other data A 1973 study (the latest available) determined that six percent of the aged population is institutionalized in psychiatric and long-stay hospitals or nursing homes Institutionalized persons had more frequent admissions and a longer average length of stay than did the noninstitutionalized elderly [Deacon 1977] This study also determined that the institushytionalized elderly used 25 times more physician sershyvices and twice as many drug prescriptions per capita than did their noninstitutionalized counterparts Thus Table 2 significantly underestimates hospital use by the elderly

HEALTH CARE FINANCING REVIEWSPRING 1980 80

It is also necessary to evaluate peoples health exshypenditures in the year of their death to assess the underestimate of the values in Table 2 The Health Inshyterview Survey captures only about half of the health care use of persons dying in the survey year The following table presents the disproportionate share of Medicare dollars spent for aged persons who died in 1976

Technical Note C

Table A Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Years 197819771976 19701965

Table B Estimated Personal Health Care Expenshyditures under Public Programs by Type of Expenditure and Source of Funds for Three Age Groups for Calendar Years 19781977 1976 1970 1965

Table C Expenditures for Health Services and Supshyplies under Public Programs by Program for Three Age Groups for Calendar Years 1978 19771976 1970 1965

Table D Estimated Amount and Percentage Distribution of Personal Health Care Exshypenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 197819771976 1970 1965

Distribution of Medicare Expenditures for Persons Who Died in 1976

Percent of Medicare Percent of Total Recipients Who Died Medicare Dollars

Age Group in 1976 Spent for Those Recipients

All ages 65 and Over 79 207

65-69 40 15370-74 58 18575-79 80 20380-84 118 24985 and Over 198 321

Source Unpublished HCFA data

TABLE A

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1978

All Ages Under 19 19-64 65 and Over

Type of Expenditure Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate amount (in millions)

Total $167911 $102870 $65042 $19875 $14180 $5696 $98668 $70497 $28172 $49366 $18192 $31175

Hospital Care 76025 35107 40919 7070 3835 3235 47785 28626 19159 21169 2645 18524 PhysiciansServices 35250 25811 9439 5215 4382 833 21124 17808 3316 8910 3620 5290 Dentists Services 13300 12761 539 2780 2546 234 9137 8876 261 1383 1338 45 Other Professional Services 4275 3303 972 398 193 205 2787 2480 307 1090 631 459 Drugs and Drug Sundries 15098 13798 1300 2823 2650 173 9044 8419 625 3231 2728 503 Eyeglasses and Appliances 3879 3522 357 481 459 22 2793 2659 134 605 405 201 Nursing-Home Care 15751 7394 8358 68 1 67 3057 600 2457 12624 6790 5834 Other Health Services 4333 1175 3158 1040 113 927 2941 1028 1913 354 35 319

Per Capita Amount Total $75298 $46131 $29167 $28607 $20410 $8199 $76396 $54584 $21813 $202619 $74668 $127955

Hospital Care 34093 15743 18350 10176 5520 4656 36998 22164 14834 86886 10856 76030 PhysiciansServices 15808 11575 4233 7506 6307 1199 16356 13788 2567 36570 14858 21712 DentistsServices 5964 5723 242 4001 3665 337 7075 6872 202 5676 5492 185 Other Professional Services 1917 1481 436 573 278 295 2158 1920 238 4474 2590 1884 Drugs and Drug Sundries 6770 6187 583 4063 3814 249 7002 6519 484 13261 11197 2064 Eyeglasses and Appliances 1740 1579 160 692 661 32 2162 2059 104 2483 1662 825 Nursing-Home Care 7064 3316 3748 100 01 96 2367 465 1902 51814 27869 23945 Other Health Services 1943 527 1416 1497 163 1334 2277 796 1481 1453 144 1310

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 453 341 629 356 270 568 484 406 680 429 145 594 PhysiciansServices 210 251 145 262 309 146 214 253 118 180 199 170 Dentists Services 79 124 8 140 180 41 93 126 9 28 74 1 Other Professional Services 25 32 15 20 14 36 28 35 11 22 35 15 Drugs and Drug Sundries 90 134 20 142 187 30 92 119 22 65 150 16 Eyeglasses and Appliances 23 34 5 24 32 4 28 38 5 12 22 6 Nursing-Home Care 94 72 129 3 mdash 12 31 9 87 256 373 187 Other Health Services 26 11 49 52 8 163 30 15 68 7 2 10

8 1 HEALTH CARE FINANCING REVIEW SPRING 1980

TABLE 10

Hospital Expenditures and Percentage Distribution of Channels of Payment by Type of Hospital and Age Group Calendar Years 1970 and 1977 (Dollar amounts In millions)

1977 1970

65 and 65 and Total Under 19 19-64 Over Total Under 19 19-64 Over

Psychiatric Hospitals (non-Federal) $4015 $199 $2632 $1184 $2534 $81 $1710 $744 State and Local Hospitals

Sources of Payment-Total 1000 100-0 1000 1000 1000 1000 1000 1000 Medicare 17 mdash 4 49 5 mdash mdash 16 Medicaid 187 347 153 236 110 37 5 359 Other Federal 15 70 15 5 15 99 15 5 Other State and Local 446 85 465 465 701 741 791 489 Private Health Insurance 140 412 180 6 10 37 12 1 Direct Payment 195 85 183 239 159 86 176 129

Private Hospitals $661 $33 $433 $195 $258 $8 $174 $76

Sources of Payment-Total 1000 1000 1000 1000 1000 1000_ 1000 1000 Medicare 17 - 5 46 35 mdash mdash 118 Other State and Local 11 30 12 5 19 mdash 29 mdash Private Health Insurance 700 848 774 508 481 375 483 487 Philanthropy 39 30 39 41 39 125 34 39 Direct Payments 234 91 171 400 426 500 454 355

Federal Hospitals $6099 $747 $4595 $757 $2822 $499 $2025 $349

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Veterans Administration 586 - 636 856 533 mdash 599 828 Department of Defense 322 631 312 83 380 835 328 92 Other 92 369 52 61 88 165 73 80

Other Hospitals $57139 $5572 $34806 $16761 $22184 $2901 $13397 $5885

Sources of Payment-Total 1000 1000 1000 1000 1000 1000 1000 1000 Medicare 282 1 60 838 223 mdash - 842 Medicaid 99 281 105 27 88 169 99 23 Workers Compensation 23 mdash 37 2 23 mdash 38 3 State and Local Public Assistance 7 3 11 2 9 11 11 2 Other State and Local 59 13 86 19 70 95 87 19 Department of Defense 7 18 9 1 11 30 11 1 Other Government Programs 15 66 10 6 9 23 10 1 Philanthropy 12 3 19 2 15 5 19 10 Private Health Insurance 412 576 548 76 444 588 585 54 Direct Payments 83 40 115 28 107 80 140 44

Payments for drugs and drug sundries and for denshytists services are another major expense Precise dollar amounts for these payments are not currently available although surveys now under way will proshyvide estimates of out-of-pocket expenses for these types of care as well as for other health services Out-of-pocket spending for drugs and dentists sershyvices is estimated at $150 per capita in 1977 and $160 in 1978

Medicare Supplementary Medical Insurance (SMI) and private health insurance premiums are also paid out-of-pocket at a rate of $78 per capita for SMI and $90 per capita for private health insurance Persons aged 65 and over paid an average of about $698 for health related services and items out-of-pocket in 1977mdashrepresenting 12 percent of their $5900 average income

Conclusions Spending for health care varies significantly by age

group Per capita health spending increases steadily with age for most health care sectors

Young persons are spending a decreasing share of the health dollar because they are declining as a pershycent of the total population Private sources of payshyment provide most of the health expenses for the young

The middle age group spends most of the health care dollar because it is the largest age group Most health expenses for this group are paid by private sources

Persons aged 65 and over continue to increase steadily as a percent of the total population The health care needs of these persons shown by current use of various sectors of health care are expected to

HEALTH CARE FINANCING REVIEW SPRING 1980 79

grow along with their numbers resulting in an inshycreasing share of personal health care spending for and by the elderly Public financing has been and conshytinues to be the major source of funding for personal health care costs for the aged As the aged populashytion continues to grow in the future the need for public financing of health care costs is expected to increase especially for those types of care which aged persons use more oftenmdashhospital care physishycians services and nursing home care The populashytion within the age group 65 and over is aging and is expected to add to the need for health care services especially nursing home care Health care policy and financing must continue to cope with these trends which are expected to continue for many years to come

AcknowledgmentsThe author is indebted to Mary E Rieder Acting Director

of the Division of National Cost Estimates to members of the Division of National Cost Estimates and Intern Karen Young for their comments and suggestions and to Joanie Henderson and Ann Leake for secretarial assistance

Technical Note A

CONCEPTS AND DEFINITIONS

All estimates in this report relate to personal health care expendituresmdashthat portion of the total national health care expense representing health services and supplies received directly by individuals They make up total national expenditures for health together with spending for research and medical facilities conshystruction identifiable administrative costs of governshyment programs government public health activities expenses incurred by philanthropic organizations in raising funds for health care and the net costs of private health insurance (the difference between premiums and benefit payments)

All expenditures for health care that are channeled through any program established by public law are treated as public expenditures in these estimates Exshypenditures under workers compensation programs for example are included with government expenshyditures although they involve benefits paid by private insurers from premiums collected from private sources

Funds disbursed by public programs are reported as program expenditures even for example when they include significant private contributions made by beneficiaries as in the Supplementary Medical Inshysurance (SMI) program The benefit expenditures reported in this series are not adjusted to eliminate the duplication that exists when payments are made by State governments into the Medicare trust fund in the form of SMI premiums for public assistance and Supplemental Security Income (SSI) recipients and they are reported as Medicaid expenditures The amount paid by Medicaid as premiums in 1978 was $288 million for all beneficiaries that portion not reshytained in the trust fund is duplicated as a Medicare expense The amount does not noticeably affect the relationships that are reported

Health expenditures by State and local governshyments that involve funds received from the Federal government under revenue sharing are reported as State and local expenditures not as Federal expenshyditures These funds amounted to $232 million in the first half of fiscal year 1976 the latest period for which data are available No information is available on the use of such funds by specific programs

Responsibility for compiling estimates of national health care spending now resides with the Health Care Financing Administration (HCFA) Department of Health and Human Services Definitions of the various types of health care and descriptions of the public programs are contained in the various articles in the series carrying estimates for expenditures (Gibson 1979 Carroll 1979)

It should be noted that hospital care includes all exshypenditures for care in hospitalsmdashboth inpatient and outpatient The data cover all services and supplies provided

Population estimates used here are selected to corshyrespond to the population covered by expenditure estimates Since national health expenditures cover all spending for or by United States citizens and residents population estimates include the institushytionalized population the Armed Forces (both in the United States and overseas) Federal civilian employees overseas and the civilian population of outlying areas

The group under age 19 presents some problems in connection with the available demographic informashytion on utilization and expenditures Extensive intershypolation is often required to estimate certain types of expenditures for this group Because of the nature of some data sources expenses for certain persons under age 19 who are part of the labor force are not separable from those aged 19 to 64 and expenses of dependent children over age 18 are included with those of the younger group

Technical Note B

The Health Interview Survey (HIS) which provided the data for Table 2 continuously samples members of households It was not intended to obtain complete information on the deceased nor on the six percent of the aged population who are institutionalized Thus Table 2 tends to underestimate the volume of services used by the aged The degree of this underestimation can be evaluated by comparing the statistics in Table 2 to other data A 1973 study (the latest available) determined that six percent of the aged population is institutionalized in psychiatric and long-stay hospitals or nursing homes Institutionalized persons had more frequent admissions and a longer average length of stay than did the noninstitutionalized elderly [Deacon 1977] This study also determined that the institushytionalized elderly used 25 times more physician sershyvices and twice as many drug prescriptions per capita than did their noninstitutionalized counterparts Thus Table 2 significantly underestimates hospital use by the elderly

HEALTH CARE FINANCING REVIEWSPRING 1980 80

It is also necessary to evaluate peoples health exshypenditures in the year of their death to assess the underestimate of the values in Table 2 The Health Inshyterview Survey captures only about half of the health care use of persons dying in the survey year The following table presents the disproportionate share of Medicare dollars spent for aged persons who died in 1976

Technical Note C

Table A Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Years 197819771976 19701965

Table B Estimated Personal Health Care Expenshyditures under Public Programs by Type of Expenditure and Source of Funds for Three Age Groups for Calendar Years 19781977 1976 1970 1965

Table C Expenditures for Health Services and Supshyplies under Public Programs by Program for Three Age Groups for Calendar Years 1978 19771976 1970 1965

Table D Estimated Amount and Percentage Distribution of Personal Health Care Exshypenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 197819771976 1970 1965

Distribution of Medicare Expenditures for Persons Who Died in 1976

Percent of Medicare Percent of Total Recipients Who Died Medicare Dollars

Age Group in 1976 Spent for Those Recipients

All ages 65 and Over 79 207

65-69 40 15370-74 58 18575-79 80 20380-84 118 24985 and Over 198 321

Source Unpublished HCFA data

TABLE A

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1978

All Ages Under 19 19-64 65 and Over

Type of Expenditure Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate amount (in millions)

Total $167911 $102870 $65042 $19875 $14180 $5696 $98668 $70497 $28172 $49366 $18192 $31175

Hospital Care 76025 35107 40919 7070 3835 3235 47785 28626 19159 21169 2645 18524 PhysiciansServices 35250 25811 9439 5215 4382 833 21124 17808 3316 8910 3620 5290 Dentists Services 13300 12761 539 2780 2546 234 9137 8876 261 1383 1338 45 Other Professional Services 4275 3303 972 398 193 205 2787 2480 307 1090 631 459 Drugs and Drug Sundries 15098 13798 1300 2823 2650 173 9044 8419 625 3231 2728 503 Eyeglasses and Appliances 3879 3522 357 481 459 22 2793 2659 134 605 405 201 Nursing-Home Care 15751 7394 8358 68 1 67 3057 600 2457 12624 6790 5834 Other Health Services 4333 1175 3158 1040 113 927 2941 1028 1913 354 35 319

Per Capita Amount Total $75298 $46131 $29167 $28607 $20410 $8199 $76396 $54584 $21813 $202619 $74668 $127955

Hospital Care 34093 15743 18350 10176 5520 4656 36998 22164 14834 86886 10856 76030 PhysiciansServices 15808 11575 4233 7506 6307 1199 16356 13788 2567 36570 14858 21712 DentistsServices 5964 5723 242 4001 3665 337 7075 6872 202 5676 5492 185 Other Professional Services 1917 1481 436 573 278 295 2158 1920 238 4474 2590 1884 Drugs and Drug Sundries 6770 6187 583 4063 3814 249 7002 6519 484 13261 11197 2064 Eyeglasses and Appliances 1740 1579 160 692 661 32 2162 2059 104 2483 1662 825 Nursing-Home Care 7064 3316 3748 100 01 96 2367 465 1902 51814 27869 23945 Other Health Services 1943 527 1416 1497 163 1334 2277 796 1481 1453 144 1310

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 453 341 629 356 270 568 484 406 680 429 145 594 PhysiciansServices 210 251 145 262 309 146 214 253 118 180 199 170 Dentists Services 79 124 8 140 180 41 93 126 9 28 74 1 Other Professional Services 25 32 15 20 14 36 28 35 11 22 35 15 Drugs and Drug Sundries 90 134 20 142 187 30 92 119 22 65 150 16 Eyeglasses and Appliances 23 34 5 24 32 4 28 38 5 12 22 6 Nursing-Home Care 94 72 129 3 mdash 12 31 9 87 256 373 187 Other Health Services 26 11 49 52 8 163 30 15 68 7 2 10

8 1 HEALTH CARE FINANCING REVIEW SPRING 1980

grow along with their numbers resulting in an inshycreasing share of personal health care spending for and by the elderly Public financing has been and conshytinues to be the major source of funding for personal health care costs for the aged As the aged populashytion continues to grow in the future the need for public financing of health care costs is expected to increase especially for those types of care which aged persons use more oftenmdashhospital care physishycians services and nursing home care The populashytion within the age group 65 and over is aging and is expected to add to the need for health care services especially nursing home care Health care policy and financing must continue to cope with these trends which are expected to continue for many years to come

AcknowledgmentsThe author is indebted to Mary E Rieder Acting Director

of the Division of National Cost Estimates to members of the Division of National Cost Estimates and Intern Karen Young for their comments and suggestions and to Joanie Henderson and Ann Leake for secretarial assistance

Technical Note A

CONCEPTS AND DEFINITIONS

All estimates in this report relate to personal health care expendituresmdashthat portion of the total national health care expense representing health services and supplies received directly by individuals They make up total national expenditures for health together with spending for research and medical facilities conshystruction identifiable administrative costs of governshyment programs government public health activities expenses incurred by philanthropic organizations in raising funds for health care and the net costs of private health insurance (the difference between premiums and benefit payments)

All expenditures for health care that are channeled through any program established by public law are treated as public expenditures in these estimates Exshypenditures under workers compensation programs for example are included with government expenshyditures although they involve benefits paid by private insurers from premiums collected from private sources

Funds disbursed by public programs are reported as program expenditures even for example when they include significant private contributions made by beneficiaries as in the Supplementary Medical Inshysurance (SMI) program The benefit expenditures reported in this series are not adjusted to eliminate the duplication that exists when payments are made by State governments into the Medicare trust fund in the form of SMI premiums for public assistance and Supplemental Security Income (SSI) recipients and they are reported as Medicaid expenditures The amount paid by Medicaid as premiums in 1978 was $288 million for all beneficiaries that portion not reshytained in the trust fund is duplicated as a Medicare expense The amount does not noticeably affect the relationships that are reported

Health expenditures by State and local governshyments that involve funds received from the Federal government under revenue sharing are reported as State and local expenditures not as Federal expenshyditures These funds amounted to $232 million in the first half of fiscal year 1976 the latest period for which data are available No information is available on the use of such funds by specific programs

Responsibility for compiling estimates of national health care spending now resides with the Health Care Financing Administration (HCFA) Department of Health and Human Services Definitions of the various types of health care and descriptions of the public programs are contained in the various articles in the series carrying estimates for expenditures (Gibson 1979 Carroll 1979)

It should be noted that hospital care includes all exshypenditures for care in hospitalsmdashboth inpatient and outpatient The data cover all services and supplies provided

Population estimates used here are selected to corshyrespond to the population covered by expenditure estimates Since national health expenditures cover all spending for or by United States citizens and residents population estimates include the institushytionalized population the Armed Forces (both in the United States and overseas) Federal civilian employees overseas and the civilian population of outlying areas

The group under age 19 presents some problems in connection with the available demographic informashytion on utilization and expenditures Extensive intershypolation is often required to estimate certain types of expenditures for this group Because of the nature of some data sources expenses for certain persons under age 19 who are part of the labor force are not separable from those aged 19 to 64 and expenses of dependent children over age 18 are included with those of the younger group

Technical Note B

The Health Interview Survey (HIS) which provided the data for Table 2 continuously samples members of households It was not intended to obtain complete information on the deceased nor on the six percent of the aged population who are institutionalized Thus Table 2 tends to underestimate the volume of services used by the aged The degree of this underestimation can be evaluated by comparing the statistics in Table 2 to other data A 1973 study (the latest available) determined that six percent of the aged population is institutionalized in psychiatric and long-stay hospitals or nursing homes Institutionalized persons had more frequent admissions and a longer average length of stay than did the noninstitutionalized elderly [Deacon 1977] This study also determined that the institushytionalized elderly used 25 times more physician sershyvices and twice as many drug prescriptions per capita than did their noninstitutionalized counterparts Thus Table 2 significantly underestimates hospital use by the elderly

HEALTH CARE FINANCING REVIEWSPRING 1980 80

It is also necessary to evaluate peoples health exshypenditures in the year of their death to assess the underestimate of the values in Table 2 The Health Inshyterview Survey captures only about half of the health care use of persons dying in the survey year The following table presents the disproportionate share of Medicare dollars spent for aged persons who died in 1976

Technical Note C

Table A Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Years 197819771976 19701965

Table B Estimated Personal Health Care Expenshyditures under Public Programs by Type of Expenditure and Source of Funds for Three Age Groups for Calendar Years 19781977 1976 1970 1965

Table C Expenditures for Health Services and Supshyplies under Public Programs by Program for Three Age Groups for Calendar Years 1978 19771976 1970 1965

Table D Estimated Amount and Percentage Distribution of Personal Health Care Exshypenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 197819771976 1970 1965

Distribution of Medicare Expenditures for Persons Who Died in 1976

Percent of Medicare Percent of Total Recipients Who Died Medicare Dollars

Age Group in 1976 Spent for Those Recipients

All ages 65 and Over 79 207

65-69 40 15370-74 58 18575-79 80 20380-84 118 24985 and Over 198 321

Source Unpublished HCFA data

TABLE A

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1978

All Ages Under 19 19-64 65 and Over

Type of Expenditure Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate amount (in millions)

Total $167911 $102870 $65042 $19875 $14180 $5696 $98668 $70497 $28172 $49366 $18192 $31175

Hospital Care 76025 35107 40919 7070 3835 3235 47785 28626 19159 21169 2645 18524 PhysiciansServices 35250 25811 9439 5215 4382 833 21124 17808 3316 8910 3620 5290 Dentists Services 13300 12761 539 2780 2546 234 9137 8876 261 1383 1338 45 Other Professional Services 4275 3303 972 398 193 205 2787 2480 307 1090 631 459 Drugs and Drug Sundries 15098 13798 1300 2823 2650 173 9044 8419 625 3231 2728 503 Eyeglasses and Appliances 3879 3522 357 481 459 22 2793 2659 134 605 405 201 Nursing-Home Care 15751 7394 8358 68 1 67 3057 600 2457 12624 6790 5834 Other Health Services 4333 1175 3158 1040 113 927 2941 1028 1913 354 35 319

Per Capita Amount Total $75298 $46131 $29167 $28607 $20410 $8199 $76396 $54584 $21813 $202619 $74668 $127955

Hospital Care 34093 15743 18350 10176 5520 4656 36998 22164 14834 86886 10856 76030 PhysiciansServices 15808 11575 4233 7506 6307 1199 16356 13788 2567 36570 14858 21712 DentistsServices 5964 5723 242 4001 3665 337 7075 6872 202 5676 5492 185 Other Professional Services 1917 1481 436 573 278 295 2158 1920 238 4474 2590 1884 Drugs and Drug Sundries 6770 6187 583 4063 3814 249 7002 6519 484 13261 11197 2064 Eyeglasses and Appliances 1740 1579 160 692 661 32 2162 2059 104 2483 1662 825 Nursing-Home Care 7064 3316 3748 100 01 96 2367 465 1902 51814 27869 23945 Other Health Services 1943 527 1416 1497 163 1334 2277 796 1481 1453 144 1310

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 453 341 629 356 270 568 484 406 680 429 145 594 PhysiciansServices 210 251 145 262 309 146 214 253 118 180 199 170 Dentists Services 79 124 8 140 180 41 93 126 9 28 74 1 Other Professional Services 25 32 15 20 14 36 28 35 11 22 35 15 Drugs and Drug Sundries 90 134 20 142 187 30 92 119 22 65 150 16 Eyeglasses and Appliances 23 34 5 24 32 4 28 38 5 12 22 6 Nursing-Home Care 94 72 129 3 mdash 12 31 9 87 256 373 187 Other Health Services 26 11 49 52 8 163 30 15 68 7 2 10

8 1 HEALTH CARE FINANCING REVIEW SPRING 1980

It is also necessary to evaluate peoples health exshypenditures in the year of their death to assess the underestimate of the values in Table 2 The Health Inshyterview Survey captures only about half of the health care use of persons dying in the survey year The following table presents the disproportionate share of Medicare dollars spent for aged persons who died in 1976

Technical Note C

Table A Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Years 197819771976 19701965

Table B Estimated Personal Health Care Expenshyditures under Public Programs by Type of Expenditure and Source of Funds for Three Age Groups for Calendar Years 19781977 1976 1970 1965

Table C Expenditures for Health Services and Supshyplies under Public Programs by Program for Three Age Groups for Calendar Years 1978 19771976 1970 1965

Table D Estimated Amount and Percentage Distribution of Personal Health Care Exshypenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 197819771976 1970 1965

Distribution of Medicare Expenditures for Persons Who Died in 1976

Percent of Medicare Percent of Total Recipients Who Died Medicare Dollars

Age Group in 1976 Spent for Those Recipients

All ages 65 and Over 79 207

65-69 40 15370-74 58 18575-79 80 20380-84 118 24985 and Over 198 321

Source Unpublished HCFA data

TABLE A

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1978

All Ages Under 19 19-64 65 and Over

Type of Expenditure Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate amount (in millions)

Total $167911 $102870 $65042 $19875 $14180 $5696 $98668 $70497 $28172 $49366 $18192 $31175

Hospital Care 76025 35107 40919 7070 3835 3235 47785 28626 19159 21169 2645 18524 PhysiciansServices 35250 25811 9439 5215 4382 833 21124 17808 3316 8910 3620 5290 Dentists Services 13300 12761 539 2780 2546 234 9137 8876 261 1383 1338 45 Other Professional Services 4275 3303 972 398 193 205 2787 2480 307 1090 631 459 Drugs and Drug Sundries 15098 13798 1300 2823 2650 173 9044 8419 625 3231 2728 503 Eyeglasses and Appliances 3879 3522 357 481 459 22 2793 2659 134 605 405 201 Nursing-Home Care 15751 7394 8358 68 1 67 3057 600 2457 12624 6790 5834 Other Health Services 4333 1175 3158 1040 113 927 2941 1028 1913 354 35 319

Per Capita Amount Total $75298 $46131 $29167 $28607 $20410 $8199 $76396 $54584 $21813 $202619 $74668 $127955

Hospital Care 34093 15743 18350 10176 5520 4656 36998 22164 14834 86886 10856 76030 PhysiciansServices 15808 11575 4233 7506 6307 1199 16356 13788 2567 36570 14858 21712 DentistsServices 5964 5723 242 4001 3665 337 7075 6872 202 5676 5492 185 Other Professional Services 1917 1481 436 573 278 295 2158 1920 238 4474 2590 1884 Drugs and Drug Sundries 6770 6187 583 4063 3814 249 7002 6519 484 13261 11197 2064 Eyeglasses and Appliances 1740 1579 160 692 661 32 2162 2059 104 2483 1662 825 Nursing-Home Care 7064 3316 3748 100 01 96 2367 465 1902 51814 27869 23945 Other Health Services 1943 527 1416 1497 163 1334 2277 796 1481 1453 144 1310

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 453 341 629 356 270 568 484 406 680 429 145 594 PhysiciansServices 210 251 145 262 309 146 214 253 118 180 199 170 Dentists Services 79 124 8 140 180 41 93 126 9 28 74 1 Other Professional Services 25 32 15 20 14 36 28 35 11 22 35 15 Drugs and Drug Sundries 90 134 20 142 187 30 92 119 22 65 150 16 Eyeglasses and Appliances 23 34 5 24 32 4 28 38 5 12 22 6 Nursing-Home Care 94 72 129 3 mdash 12 31 9 87 256 373 187 Other Health Services 26 11 49 52 8 163 30 15 68 7 2 10

8 1 HEALTH CARE FINANCING REVIEW SPRING 1980

TABLE A (CONTINUED)

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1977

All Ages Under 19 19-64 65 and Over

Type of Expenditure Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate amount (in millions)

Total $149139 $91048 $58091 $18259 $13053 $5206 $87578 $62382 $25196 $43303 $15613 $27690

Hospital Care 67914 30964 36950 6551 3578 2973 42466 25126 17340 18897 2259 16638 Physicians Services 31242 23136 8106 4771 4027 744 18848 15923 2925 7623 3186 4437 DentistsServices 11650 11146 504 2493 2279 214 7969 7724 245 1188 1142 46 Other Professional Services 3700 2859 841 352 172 180 2408 2131 277 940 555 385 Drugs and Drug Sundries 13810 12614 1196 2624 2473 151 8244 7665 579 2941 2475 466 Eyeglasses and Appliances 3455 3158 297 439 418 21 2481 2368 113 535 374 161 Nursing-Home Care 13364 6086 7278 61 2 59 2455 496 1959 10847 5587 5260 Other Health Services 4005 1085 2920 968 103 865 2708 949 1759 332 33 299

Per Capita Amount Total $67446 $41175 $26271 $25877 $18499 $7378 $69076 $49204 $19873 $182114 $65654$116459

Hospital Care 30713 14003 16710 9284 5071 4213 33495 19818 13677 79472 9500 69972 PhysiciansServices 14129 10463 3666 6761 5707 1054 14866 12559 2307 32059 13399 18660 DentistsServices 5269 5041 228 3533 3230 303 6285 6092 193 4996 4803 193 Other Professional Services 1673 1293 380 498 244 255 1899 1681 218 3953 2334 1619 Drugs and Drug Sundries 6245 5704 541 3719 3505 214 6502 6046 457 12369 10409 1960 Eyeglasses and Appliances 1562 1428 134 622 592 30 1957 1868 90 2250 1573 677 Nursing-Home Care 6044 2752 3291 86 03 84 1936 391 1545 45618 23497 22121 Other Health Services 1811 491 1321 1372 146 1226 2136 749 1387 1396 139 1257

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 455 340 636 359 274 571 485 403 688 436 145 601 PhysiciansServices 209 254 140 261 308 142 215 255 116 176 204 160 DentistsServices 78 122 9 136 175 41 91 124 10 27 73 2 Other Professional Services 25 31 14 19 13 35 28 34 11 22 35 14 Drugs and Drug Sundries 93 139 21 144 189 28 94 123 23 68 159 17 Eyeglasses and Appliances 23 35 5 24 32 4 28 38 5 12 24 6 Nursing-Home Care 90 67 125 3 mdash 11 28 8 78 251 358 190 Other Health Services 27 12 50 53 8 167 31 15 70 8 2 11

HEALTH CARE FINANCING REVIEW SPRING 1980 82

TABLE A (CONTINUED)

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1976

All Ages Under 19 19-64 65 and Over

Type of Expenditure Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate Amount (in millions)

Total $132127 $80531 $51596 $16590 $11789 $4801 $77861 $55367 $22494 $37674 $13372 $24302

Hospital Care 59806 27037 32769 5992 3261 2731 37508 21941 15567 16305 1831 14474 PhysiciansServices 27658 20592 7066 4252 3526 726 16901 14318 2583 6505 2746 3759 DentistsServices 10131 9648 483 2209 1997 212 6909 6684 225 1013 967 46 Other Professional Services 3202 2545 657 314 198 116 2078 1863 215 810 485 325 Drugs and Drug Sundries 12809 11667 1142 2472 2315 157 7621 7088 533 2716 2263 453 Eyeglasses and Appliances 3201 2943 258 416 397 19 2295 2191 104 490 357 134 Nursing-Home Care 11452 5106 6346 55 mdash 55 2001 412 1589 9395 4693 4702 Other Health Services 3868 993 2875 880 94 786 2548 869 1679 440 30 410

Per Capita Amount Total $60245 $36719 $23526 $23234 $16510 $6724 $62431 $44395 $18036 $162388 $57638 $104750

Hospital Care 27269 12328 14941 8392 4567 3825 30075 17593 12482 70280 7892 62388 PhysiciansServices 12611 9389 3222 5955 4938 1017 13552 11481 2071 28039 11836 16203 DentistsServices 4619 4399 220 3094 2797 297 5540 5359 180 4366 4168 198 Other Professional Services 1460 1160 300 440 277 162 1666 1494 172 3491 2090 1401 Drugs and Drug Sundries 5840 5319 521 3462 3242 220 6110 5683 427 11707 9754 1953 Eyeglasses and Appliances 1460 1342 118 583 556 27 1840 1757 83 2112 1539 573 Nursing-Home Care 5222 2329 2893 77 mdash 77 1604 330 1274 40496 20228 20267 Other Health Services 1764 453 1311 1232 132 1100 2043 697 1346 1897 130 1767

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 453 336 635 361 277 569 482 396 692 433 137 596 PhysiciansServices 209 256 137 256 299 151 217 259 115 173 205 155 DentistsServices 77 120 9 133 169 44 89 121 10 27 72 2 Other Professional Services 24 32 13 19 17 24 27 34 10 22 36 13 Drugs and Drug Sundries 97 145 22 149 196 33 98 128 24 72 169 19 Eyeglasses and Appliances 24 37 5 25 34 4 29 40 4 13 27 6 Nursing-Home Care 87 63 123 3 mdash 11 26 7 71 249 351 194 Other Health Services 29 12 56 53 8 164 33 16 74 12 2 17

HEALTH CARE FINANCING REVIEW SPRING 1980 83

TABLE A (CONTINUED)

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1970

All Ages Under 19 19-64 65 and Over

Type of Expendi ture Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate Amount (in millions)

Total $65723 $43281 $22442 $10356 $7878 $2479 $38096 $28708 $9389 $17270 $6694 $10577

Hospital Care 27799 13227 14572 3439 2001 1438 17306 10421 6885 7054 806 6248 PhysiciansServices 14340 11253 3087 2737 2451 286 8573 7633 940 3030 1166 1864 DentistsServices 4750 4526 223 1188 1111 77 3149 3030 119 413 386 27 Other Professional Services 1595 1374 221 183 144 39 1022 946 76 389 285 104 Drugs and Drug Sundries 8406 7922 484 1883 1816 67 4791 4580 211 1732 1524 208 Eyeglasses and Appliances 2099 1992 107 309 297 12 1486 1440 46 304 255 49 Nursing-Home Care 4677 2395 2282 61 mdash 61 472 140 332 4144 2255 1889 Other Health Services 2058 592 1466 556 57 499 1297 518 779 204 18 186

Per Capita Amount Total $31537 $20768 $10769 $13768 $10473 $3296 $33727 $25415 $8312 $85381 $33100 $52280

Hospital Care 13339 6347 6992 4572 2660 1912 15321 9226 6095 34874 3985 30889 Physicians Services 6881 5400 1481 3639 3258 380 7590 6758 832 14980 5765 9215 Dentists Services 2280 2172 107 1580 1477 102 2788 2682 105 2042 1908 133 Other Professional Services 765 659 106 243 191 52 905 837 67 1923 1409 514 Drugs and Drug Sundries 4034 3801 232 2503 2414 89 4242 4055 187 8563 7534 1028 Eyeglasses and Appliances 1007 956 51 411 395 16 1316 1275 41 1503 1261 242 Nursing-Home Care 2244 1149 1095 81 mdash 81 418 124 294 20487 11148 9339 Other Health Services 990 284 703 739 76 663 1148 459 690 1009 90 920

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 423 306 649 332 254 580 454 363 733 408 120 591 PhysiciansServices 218 260 138 264 311 115 225 266 100 175 174 176 DentistsServices 72 105 10 115 141 31 83 106 13 24 58 3 Other Professional Services 24 32 10 18 18 16 27 33 8 23 43 10 Drugs and Drug Sundries 128 183 22 182 231 27 126 160 22 100 228 20 Eyeglasses and Appliances 32 46 5 30 38 5 39 50 5 18 38 5 Nursing-Home Care 71 55 102 6 mdash 25 12 5 35 240 337 179 Other Health Services 31 14 65 54 7 201 34 18 83 12 3 18

8 4 HEALTH CARE FINANCING REVIEW SPRING 1980

TABLE A (CONTINUED)

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1965

All Ages Under 19 19-64 65 and Over

Type of Expendi ture Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate amount (In millions)

Total $37267 $29387 $7880 $6383 $5391 $992 $22012 $17781 $4231 $8869 $6213 $2656

Hospital Care 13935 8539 5395 1731 1111 620 8908 5753 3155 3296 1677 1619 PhysiciansServices 8474 7890 583 1712 1673 39 5025 4601 424 1737 1617 120 DentistsServices 2809 2760 49 772 753 19 1823 1805 18 213 201 12 Other Professional Services 1033 996 37 135 129 6 654 631 23 244 236 8 Drugs and Drug Sundries 5771 5575 196 1397 1382 15 3226 3163 63 1148 1030 118 Eyeglasses and Appliances 1866 1836 30 306 302 4 1305 1281 24 256 254 2 Nursing-Home Care 2072 1360 712 mdash mdash mdash 247 173 74 1825 1187 638 Other Health Services 1306 429 877 330 41 289 824 375 449 150 13 137

Per Capita Amount Total $18843 $14859 $3984 $8302 $7012 $1290 $21558 $17414 $4143 $47231 $33097 $14135

Hospital Care 7046 4318 2728 2251 1445 806 8724 5634 3090 17552 8931 8622 PhysiciansServices 4285 3989 295 2227 2176 51 4921 4506 415 9250 8611 639 DentistsServices 1420 1396 24 1004 979 25 1785 1768 18 1130 1070 64 Other Professional Services 522 504 19 176 168 08 641 618 23 1299 1257 43 Drugs and Drug Sundries 2918 2819 99 1817 1798 20 3160 3098 62 6114 5485 628 Eyeglasses and Appliances 944 928 15 398 393 05 1278 1255 24 1363 1353 11 Nursing-Home Care 1048 688 360 mdash mdash mdash 242 169 72 9719 6321 3398 Other Health Services 660 217 443 429 53 376 807 367 440 799 69 730

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 374 291 685 271 206 625 405 324 746 372 270 610 Physicians Services 227 268 74 268 310 40 228 259 100 196 260 45 DentistsServices 75 94 6 121 140 19 83 102 4 24 32 5 Other Professional Services 28 34 5 21 24 6 30 35 6 28 38 3 Drugs and Drug Sundries 155 190 25 219 256 16 147 178 15 129 166 44 Eyeglasses and Appliances 50 62 4 48 56 4 59 72 6 29 41 1 Nursing-Home Care 56 46 90 mdash mdash mdash 11 10 17 206 191 240 Other Health Services 35 15 111 52 8 291 37 21 106 17 2 52

HEALTH CARE FINANCING REVIEW SPRING 1980 85

TABLE B

Estimated Personal Health Care Expenditures under Public Programs by Type of Expenditure and Source of Funds for Three Age Groups for Calendar Years 19781977197619701965

(in millions)

All Ages Under 19 19-64 65 and Over

State amp State amp State amp State amp Type of Expendi ture Total Federal Local Total Federal Local Total Federal Local Total Federal Local

1978

Total $65042 $46503 $18539 $5696 $3757 $1939 $28172 $15968 $12204 $31175 $26780 $4395

Hospital Care 40919 30344 10574 3235 2293 942 19159 10886 8273 18524 17165 1359 PhysiciansServices 9439 7066 2374 833 485 348 3316 1461 1855 5290 5120 170 DentistsServices 539 310 229 234 126 108 261 155 106 45 28 17 Other Professional Services 972 677 295 205 118 87 307 138 169 459 421 38 Drugs and Drug Sundries 1300 667 634 173 96 77 625 308 317 503 264 239 Eyeglasses and Appliances 357 285 72 22 15 7 134 71 63 201 199 2 Nursing-Home Care 8358 4715 3643 67 35 32 2457 1344 1113 5834 3336 2498 Other Health Services 3158 2440 719 927 589 338 1913 1605 308 319 247 72

1977 Total $58091 $41096 $16996 $5206 $3413 $1793 $25196 $13994 $11203 $27690 $23689 $4001

Hospital Care 36950 27141 9809 2973 2112 861 17340 9655 7685 16638 15373 1263 PhysiciansServices 8106 5995 2111 744 435 309 2925 1275 1650 4437 4284 153 DentistsServices 504 295 209 214 117 97 245 148 97 46 29 17 Other Professional Services 841 570 271 180 105 75 277 115 162 385 351 34 Drugs and Drug Sundries 1196 619 577 151 84 67 579 289 290 466 246 220 Eyeglasses and Appliances 297 234 63 21 14 7 113 59 54 161 159 2 Nursing-Home Care 7278 4141 3137 59 31 28 1959 1081 878 5260 3030 2230 Other Health Services 2920 2101 818 865 515 350 1759 1372 387 299 217 82

1976

Total $51596 $36283 $15314 $4801 $3194 $1607 $22494 $12493 $10001 $24302 $20595 $3707

Hospital Care 32769 23880 8890 2731 1961 770 15567 8604 6963 14474 13316 1158 PhysiciansServices 7066 5143 1923 726 422 304 2583 1105 1478 3759 3616 143 DentistsServices 483 286 197 212 115 97 225 141 84 46 30 16 Other Professional Services 657 462 195 116 71 45 215 101 114 325 290 35 Drugs and Drug Sundries 1142 593 549 157 87 70 533 266 267 453 240 213 Eyeglasses and Appliances 258 201 57 19 13 6 104 54 50 134 133 1 Nursing-Home Care 6346 3605 2741 55 29 26 1589 877 712 4702 2699 2003 Other Health Services 2875 2114 762 786 497 289 1679 1346 333 410 271 138

1970

Total $22442 $14561 $7881 $2479 $1471 $1008 $9389 $4228 $5161 $10577 $8864 $1713

Hospital Care 14572 9424 5148 1438 837 601 6885 3025 3860 6348 5561 687 PhysiciansServices 3087 2230 860 286 157 129 940 286 654 1864 1787 77 DentistsServices 223 130 93 77 41 36 119 73 46 27 16 11 Other Professional Services 221 140 79 39 24 15 76 25 51 104 91 13 Drugs and Drug Sundries 484 240 246 67 36 31 211 99 112 208 105 103 Eyeglasses and Appliances 107 77 30 12 7 5 46 22 24 49 48 1 Nursing-Home Care 2282 1344 938 61 28 33 332 156 176 1889 1160 729 Other Health Services 1466 976 489 499 341 158 779 541 238 186 94 92

1965

Total $7880 $3787 $4093 $992 $603 $389 $4231 $1817 $2414 $2656 $1367 $1289

Hospital Care 5395 2429 2966 620 364 256 3155 1344 1811 1619 721 898 PhysiciansServices 583 150 433 39 25 14 424 54 370 120 71 49 DentistsServices 49 32 17 19 12 7 18 12 6 12 8 4 Other Professional Services 37 12 25 6 3 3 23 4 19 8 5 3 Drugs and Drug Sundries 196 120 76 15 10 5 63 34 29 118 76 42 Eyeglasses and Appliances 30 14 16 4 2 2 24 10 14 2 2 mdash Nursing-Home Care 712 460 252 mdash mdash mdash 74 48 26 638 412 226 Other Health Services 877 570 308 289 187 102 449 311 139 137 72 67

8 6 HEALTH CARE FINANCING REVIEW SPRING 1980

TABLE C

Estimated Personal Health Care Expenditures for Health Services and Supplies under Public Programs by Program for Three Age Groups for Calendar Years 19781977197619701965

(in millions)

1978 1977 1976Type of Program Under 65 and Under 65 and Under 65 and

Total 19 19-64 Over Total 19 19-64 Over Total 19 19-64 Over

All public programs $65042 $5696 $28172 $31175 $58091 $5206 $25196 $27690 $51596 $4801 $22494 $24302 Federal 46503 3757 15968 26780 41096 3413 13994 23689 36283 3194 12493 20595 State and Local 18539 1939 12204 4395 16996 1793 11203 4001 15314 1607 10001 3707

Major Program Areas Medicare 24919 30 3114 21775 21768 25 2602 19141 18417 17 2087 16313

(Federal)

Medicaid 18365 3142 8612 6611 16657 2849 7812 5996 14849 2534 6673 5642 Federal 10234 1751 4799 3684 9384 1605 4401 3378 8391 1432 3771 3188 State and Local 8131 1391 3813 2927 7273 1244 3411 2618 6458 1102 2902 2454

Other Medical Public Assistance Federal mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash State and Local 1157 100 665 391 1098 93 626 380 1048 83 594 371

Veterans Administration 4943 mdash 3890 1053 4360 mdash 3431 929 4111 mdash 3235 876

(Federal)

Department of Defense 3625 823 2671 131 2336 788 2437 112 3230 811 2327 92 (Federal)

Workers Compensation 3061 mdash 2968 93 2663 mdash 2583 80 2325 mdash 2255 70 (Medical Benefits) mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash Federal Employees 117 mdash 113 4 79 mdash 77 2 69 mdash 67 2 State and Local Programs 2944 mdash 2855 89 2584 mdash 2506 78 2256 mdash 2188 68

State and Local Hospitals 5488 85 4461 942 5170 88 4212 870 4749 83 3898 768 (Net)

Other Public Expenditures for Personal Health Care 3484 1515 1787 182 3039 1363 1493 183 2867 1273 1425 168

Federal 2665 1151 1378 136 2169 995 1043 131 2065 935 1008 122 State and Local 819 364 409 46 870 368 450 52 802 338 417 46

HEALTH CARE FINANCING REVIEW SPRING 1980 87

TABLE C (CONTINUED)

Estimated Personal Health Care Expenditures for Health Services and Supplies under Public Programs by Program for Three Age Groups for Calendar Years 19781977197619701965

(in millions)

Type of Programs 1970 1965 Under 65 and Under 65 and

Total _ _ 1 9 _ _ 19-64__ Over Total _ _ 19_ 19-64 Over

All public programs $22442 $2502 $9341 $10600 $7880 $992 $4231 $2657 Federal 14561 1484 4215 8864 3787 603 1817 1367 State and Local 7881 1018 5126 1736 4093 389 2414 1290

Major Program Areas Medicare 7099 mdash mdash 7099 mdash mdash - mdash

(Federal)

Medicaid 5105 913 2298 1894 mdash mdash mdash mdash Federal 2795 500 1258 1037 mdash mdash mdash mdash State and Local 2310 413 1040 857 mdash mdash mdash mdash

Other Medical Public Assistance 849 82 231 536 2113 217 275 1621 Federal 243 mdash mdash 243 1359 140 177 1043 State and Local 606 82 231 293 753 77 98 578

Veterans Administration 1745 mdash 1374 372 1133 mdash 892 241 (Federal)

Department of Defense 1875 656 1162 56 1012 354 627 30 (Federal)

Workers Compensation (Medical Benefits) 1044 mdash 1010 34 604 mdash 585 19 Federal Employees 23 mdash 22 1 12 mdash 12 mdash

State and Local Programs 1021 mdash 988 33 592 mdash 573 19

State and Local Hospitals 3341 316 2550 476 2378 185 1545 648 (Net)

Other Public Expenditures for Personal Health Care 1383 534 716 133 640 237 308 97

Federal 781 327 399 56 269 109 109 52 State and Local 602 207 317 77 372 128 199 44

HEALTH CARE FINANCING REVIEWSPRING 1980 88

TABLE D

Estimated Amount and Percentage Distribution of Personal Health Care Expenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 19781977197619701965

Amount (in millions) Percentage Distribution Public Public

Medishy Medishy Medishy Medi-Total Private Total care caid Other Total Private Total care caid Other

1978

Total $49366 $18192 $31175 $21775 $6611 $2789 1000 368 632 441 134 57

Hospital CarePhysicians Services

21169 8910

2645 3620

18524 5290

15799 4954

754 260

1971 76

1000 1000

125 406

875 594

746 556

36 29

93 9

DentistsServices 1383 1338 45 mdash 34 11 1000 968 32 mdash 24 8 Other Professional Services 1090 631 459 381 72 6 1000 579 421 350 66 6 Drugs and Drug Sundries 3231 2728 503 mdash 468 35 1000 844 156 mdash 145 11 Eyeglasses and AppliancesNursing-Home CareOther Health Services

605 12624

354

405 6790 35

201 5834 319

189 380 72

mdash 4969 54

12 485 193

1000 1000 1000

669 538 99

332 462 901

312 30 203

_ 394 153

20 38 545

1977

Total $43303 $15613 $27690 $19141 $5999 $2552 1000 361 639 442 139 59

Hospital Care 18897 2259 16638 14119 737 1782 1000 120 880 747 39 94 Physicians ServicesDentistsServices

7623 1188

3186 1142

4437 46

4132 mdash

236 33

69 13

1000 1000

418 961

582 39

542 mdash

31 28

9 11

Other Professional Services 940 555 385 316 62 7 1000 590 410 336 66 7 Drugs and Drug SundriesEyeglasses and AppliancesNursing-Home CareOther Health Services

2941 535

10847 332

2475 374 5587 33

466 161 5260 299

mdash 152 364 58

432 mdash 4439 60

34 9 457 181

1000 1000 1000 1000

842 699 515 100

158 301 485 901

mdash 284 34 175

147 mdash 409 181

11 17 42 545

1976

Total $37674 $13372 $24302 $16313 $5644 $2345 1000 355 645 433 150 62

Hospital Care 16305 1831 14474 12095 756 1623 1000 112 888 742 46 100 PhysiciansServicesDentistsServices

6505 1013

2746 967

3759 46

3474 mdash

221 32

64 14

1000 1000

422 954

578 46

534 mdash

34 32

10 14

Other Professional Services 810 485 325 252 67 6 1000 599 401 311 83 7 Drugs and Drug SundriesEyeglasses and AppliancesNursing-Home CareOther Health Services

2716 490

9395 440

2263 357 4693 30

453 134 4702 410

mdash 125 320 47

419 mdash 3964 185

34 9 418 178

1000 1000 1000 1000

833 728 500 68

167 273 500 932

mdash 255 34 10

154 mdash 422 420

13 18 44 405

1970

Total $17270 $6694 $10577 $7099 $1894 $1584 1000 388 612 411 110 92

Hospital Care 7054 806 6248 4974 405 869 1000 114 886 705 57 123 PhysiciansServicesDentists Services

3030 413

1166 386

1864 27

1718 mdash

115 19

31 9

1000 1000

385 935

615 65

567 mdash

38 46

10 22

Other Professional Services 389 285 104 79 22 3 1000 733 267 203 57 8 Drugs and Drug Sundries 1732 1524 208 mdash 190 18 1000 880 120 shy 110 10 Eyeglasses and Appliances 304 255 49 45 mdash 4 1000 839 161 148 mdash 13 Nursing-Home CareOther Health Services

4144 204

2255 18

1889 186

265 17

1112 31

512 138

1000 1000

544 88

456 912

64 83

268 152

124 677

1965

Total $8869 $6213 $2656 mdash shy $2656 1000 700 300 shy shy 300

Hospital Care 3296 1677 1619 mdash shy 1619 1000 509 491 shy shy 491 PhysiciansServicesDentistsServices

1737 213

1617 201

120 12

mdash mdash

shymdash 120

12 1000 1000

931 944

69 56

mdash mdash

mdash mdash

69 56

Other Professional Services 244 236 8 mdash mdash 8 1000 967 33 mdash mdash 33 Drugs and Drug SundriesEyeglasses and AppliancesNursing-Home CareOther Health Services

1148 256

1825 150

1030 254 1187 13

118 2 638 137

mdash mdash mdash mdash

mdash mdash shy

shy

118 2

638 137

1000 1000 1000 1000

897 992 650 87

103 8 350 913

mdash mdash shy

shy

mdash mdash

shyshy

103 8

350 913

HEALTH CARE FINANCING REVIEW SPRING 1980 89

References

Characteristics of Aged Institutionalized Enrollees 1973-Current Medicare Survey Ronald Deacon October 31 1977

Cost of Living Council Health Care Final Phase IV Regulashytions Vol 39 No 16 1974

Current Estimates from the Health Interview Survey 1978 Series 10 No 130 NCHS

Health Characteristics of Persons with Chronic Activity Limitations United Statesmdash1974 Series 10 No 112 NCHS

Medicare Summary Utilization and Reimbursement by Pershyson 1967 1968 1969 1976 HCFA

The National Ambulatory Medical Care Survey 1975 Sumshymary Series 13 No 33 NCHS

National Health Expenditures 1978 Robert Gibson Health Care Financing Review Summer 1979

National Health Insurance Issues The Cost of a National Prescription Program Gordon Trapnell 1979

National Nursing Home Survey 1977 Series 13 No 43 NCHS

Panel Survey American Hospital Association unpublished data 1966-1978

Patient Charges in Short-Stay Hospitals United States 1968-1970 Series 13 No 15 NCHS

Private Health Insurance Plans in 1977 Coverage Enrollshyment and Financial Experience Marjorie Smith Carroll and Ross Arnett III Health Care Financing Review Fall 1979

Time Cells and Aging Bernard Strehler 1977

Time trend data for Medicare hospital admissions and surgical rates from unpublished Medicare data HCFA 1976

Two Decades of Health Services Social Survey Trends In Use and Expenditure Anderson et al 1976

Utilization of Short-Stay HospitalsmdashAnnual Summary for the United States 1977 Series 13 No 41 NCHS

Utilization of Short-Stay HospitalsmdashUnited States 1967 Series 13 No 9 NCHS

9 0 HEALTH CARE FINANCING REVIEW SPRING 1980

TABLE A (CONTINUED)

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1976

All Ages Under 19 19-64 65 and Over

Type of Expenditure Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate Amount (in millions)

Total $132127 $80531 $51596 $16590 $11789 $4801 $77861 $55367 $22494 $37674 $13372 $24302

Hospital Care 59806 27037 32769 5992 3261 2731 37508 21941 15567 16305 1831 14474 PhysiciansServices 27658 20592 7066 4252 3526 726 16901 14318 2583 6505 2746 3759 DentistsServices 10131 9648 483 2209 1997 212 6909 6684 225 1013 967 46 Other Professional Services 3202 2545 657 314 198 116 2078 1863 215 810 485 325 Drugs and Drug Sundries 12809 11667 1142 2472 2315 157 7621 7088 533 2716 2263 453 Eyeglasses and Appliances 3201 2943 258 416 397 19 2295 2191 104 490 357 134 Nursing-Home Care 11452 5106 6346 55 mdash 55 2001 412 1589 9395 4693 4702 Other Health Services 3868 993 2875 880 94 786 2548 869 1679 440 30 410

Per Capita Amount Total $60245 $36719 $23526 $23234 $16510 $6724 $62431 $44395 $18036 $162388 $57638 $104750

Hospital Care 27269 12328 14941 8392 4567 3825 30075 17593 12482 70280 7892 62388 PhysiciansServices 12611 9389 3222 5955 4938 1017 13552 11481 2071 28039 11836 16203 DentistsServices 4619 4399 220 3094 2797 297 5540 5359 180 4366 4168 198 Other Professional Services 1460 1160 300 440 277 162 1666 1494 172 3491 2090 1401 Drugs and Drug Sundries 5840 5319 521 3462 3242 220 6110 5683 427 11707 9754 1953 Eyeglasses and Appliances 1460 1342 118 583 556 27 1840 1757 83 2112 1539 573 Nursing-Home Care 5222 2329 2893 77 mdash 77 1604 330 1274 40496 20228 20267 Other Health Services 1764 453 1311 1232 132 1100 2043 697 1346 1897 130 1767

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 453 336 635 361 277 569 482 396 692 433 137 596 PhysiciansServices 209 256 137 256 299 151 217 259 115 173 205 155 DentistsServices 77 120 9 133 169 44 89 121 10 27 72 2 Other Professional Services 24 32 13 19 17 24 27 34 10 22 36 13 Drugs and Drug Sundries 97 145 22 149 196 33 98 128 24 72 169 19 Eyeglasses and Appliances 24 37 5 25 34 4 29 40 4 13 27 6 Nursing-Home Care 87 63 123 3 mdash 11 26 7 71 249 351 194 Other Health Services 29 12 56 53 8 164 33 16 74 12 2 17

HEALTH CARE FINANCING REVIEW SPRING 1980 83

TABLE A (CONTINUED)

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1970

All Ages Under 19 19-64 65 and Over

Type of Expendi ture Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate Amount (in millions)

Total $65723 $43281 $22442 $10356 $7878 $2479 $38096 $28708 $9389 $17270 $6694 $10577

Hospital Care 27799 13227 14572 3439 2001 1438 17306 10421 6885 7054 806 6248 PhysiciansServices 14340 11253 3087 2737 2451 286 8573 7633 940 3030 1166 1864 DentistsServices 4750 4526 223 1188 1111 77 3149 3030 119 413 386 27 Other Professional Services 1595 1374 221 183 144 39 1022 946 76 389 285 104 Drugs and Drug Sundries 8406 7922 484 1883 1816 67 4791 4580 211 1732 1524 208 Eyeglasses and Appliances 2099 1992 107 309 297 12 1486 1440 46 304 255 49 Nursing-Home Care 4677 2395 2282 61 mdash 61 472 140 332 4144 2255 1889 Other Health Services 2058 592 1466 556 57 499 1297 518 779 204 18 186

Per Capita Amount Total $31537 $20768 $10769 $13768 $10473 $3296 $33727 $25415 $8312 $85381 $33100 $52280

Hospital Care 13339 6347 6992 4572 2660 1912 15321 9226 6095 34874 3985 30889 Physicians Services 6881 5400 1481 3639 3258 380 7590 6758 832 14980 5765 9215 Dentists Services 2280 2172 107 1580 1477 102 2788 2682 105 2042 1908 133 Other Professional Services 765 659 106 243 191 52 905 837 67 1923 1409 514 Drugs and Drug Sundries 4034 3801 232 2503 2414 89 4242 4055 187 8563 7534 1028 Eyeglasses and Appliances 1007 956 51 411 395 16 1316 1275 41 1503 1261 242 Nursing-Home Care 2244 1149 1095 81 mdash 81 418 124 294 20487 11148 9339 Other Health Services 990 284 703 739 76 663 1148 459 690 1009 90 920

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 423 306 649 332 254 580 454 363 733 408 120 591 PhysiciansServices 218 260 138 264 311 115 225 266 100 175 174 176 DentistsServices 72 105 10 115 141 31 83 106 13 24 58 3 Other Professional Services 24 32 10 18 18 16 27 33 8 23 43 10 Drugs and Drug Sundries 128 183 22 182 231 27 126 160 22 100 228 20 Eyeglasses and Appliances 32 46 5 30 38 5 39 50 5 18 38 5 Nursing-Home Care 71 55 102 6 mdash 25 12 5 35 240 337 179 Other Health Services 31 14 65 54 7 201 34 18 83 12 3 18

8 4 HEALTH CARE FINANCING REVIEW SPRING 1980

TABLE A (CONTINUED)

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1965

All Ages Under 19 19-64 65 and Over

Type of Expendi ture Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate amount (In millions)

Total $37267 $29387 $7880 $6383 $5391 $992 $22012 $17781 $4231 $8869 $6213 $2656

Hospital Care 13935 8539 5395 1731 1111 620 8908 5753 3155 3296 1677 1619 PhysiciansServices 8474 7890 583 1712 1673 39 5025 4601 424 1737 1617 120 DentistsServices 2809 2760 49 772 753 19 1823 1805 18 213 201 12 Other Professional Services 1033 996 37 135 129 6 654 631 23 244 236 8 Drugs and Drug Sundries 5771 5575 196 1397 1382 15 3226 3163 63 1148 1030 118 Eyeglasses and Appliances 1866 1836 30 306 302 4 1305 1281 24 256 254 2 Nursing-Home Care 2072 1360 712 mdash mdash mdash 247 173 74 1825 1187 638 Other Health Services 1306 429 877 330 41 289 824 375 449 150 13 137

Per Capita Amount Total $18843 $14859 $3984 $8302 $7012 $1290 $21558 $17414 $4143 $47231 $33097 $14135

Hospital Care 7046 4318 2728 2251 1445 806 8724 5634 3090 17552 8931 8622 PhysiciansServices 4285 3989 295 2227 2176 51 4921 4506 415 9250 8611 639 DentistsServices 1420 1396 24 1004 979 25 1785 1768 18 1130 1070 64 Other Professional Services 522 504 19 176 168 08 641 618 23 1299 1257 43 Drugs and Drug Sundries 2918 2819 99 1817 1798 20 3160 3098 62 6114 5485 628 Eyeglasses and Appliances 944 928 15 398 393 05 1278 1255 24 1363 1353 11 Nursing-Home Care 1048 688 360 mdash mdash mdash 242 169 72 9719 6321 3398 Other Health Services 660 217 443 429 53 376 807 367 440 799 69 730

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 374 291 685 271 206 625 405 324 746 372 270 610 Physicians Services 227 268 74 268 310 40 228 259 100 196 260 45 DentistsServices 75 94 6 121 140 19 83 102 4 24 32 5 Other Professional Services 28 34 5 21 24 6 30 35 6 28 38 3 Drugs and Drug Sundries 155 190 25 219 256 16 147 178 15 129 166 44 Eyeglasses and Appliances 50 62 4 48 56 4 59 72 6 29 41 1 Nursing-Home Care 56 46 90 mdash mdash mdash 11 10 17 206 191 240 Other Health Services 35 15 111 52 8 291 37 21 106 17 2 52

HEALTH CARE FINANCING REVIEW SPRING 1980 85

TABLE B

Estimated Personal Health Care Expenditures under Public Programs by Type of Expenditure and Source of Funds for Three Age Groups for Calendar Years 19781977197619701965

(in millions)

All Ages Under 19 19-64 65 and Over

State amp State amp State amp State amp Type of Expendi ture Total Federal Local Total Federal Local Total Federal Local Total Federal Local

1978

Total $65042 $46503 $18539 $5696 $3757 $1939 $28172 $15968 $12204 $31175 $26780 $4395

Hospital Care 40919 30344 10574 3235 2293 942 19159 10886 8273 18524 17165 1359 PhysiciansServices 9439 7066 2374 833 485 348 3316 1461 1855 5290 5120 170 DentistsServices 539 310 229 234 126 108 261 155 106 45 28 17 Other Professional Services 972 677 295 205 118 87 307 138 169 459 421 38 Drugs and Drug Sundries 1300 667 634 173 96 77 625 308 317 503 264 239 Eyeglasses and Appliances 357 285 72 22 15 7 134 71 63 201 199 2 Nursing-Home Care 8358 4715 3643 67 35 32 2457 1344 1113 5834 3336 2498 Other Health Services 3158 2440 719 927 589 338 1913 1605 308 319 247 72

1977 Total $58091 $41096 $16996 $5206 $3413 $1793 $25196 $13994 $11203 $27690 $23689 $4001

Hospital Care 36950 27141 9809 2973 2112 861 17340 9655 7685 16638 15373 1263 PhysiciansServices 8106 5995 2111 744 435 309 2925 1275 1650 4437 4284 153 DentistsServices 504 295 209 214 117 97 245 148 97 46 29 17 Other Professional Services 841 570 271 180 105 75 277 115 162 385 351 34 Drugs and Drug Sundries 1196 619 577 151 84 67 579 289 290 466 246 220 Eyeglasses and Appliances 297 234 63 21 14 7 113 59 54 161 159 2 Nursing-Home Care 7278 4141 3137 59 31 28 1959 1081 878 5260 3030 2230 Other Health Services 2920 2101 818 865 515 350 1759 1372 387 299 217 82

1976

Total $51596 $36283 $15314 $4801 $3194 $1607 $22494 $12493 $10001 $24302 $20595 $3707

Hospital Care 32769 23880 8890 2731 1961 770 15567 8604 6963 14474 13316 1158 PhysiciansServices 7066 5143 1923 726 422 304 2583 1105 1478 3759 3616 143 DentistsServices 483 286 197 212 115 97 225 141 84 46 30 16 Other Professional Services 657 462 195 116 71 45 215 101 114 325 290 35 Drugs and Drug Sundries 1142 593 549 157 87 70 533 266 267 453 240 213 Eyeglasses and Appliances 258 201 57 19 13 6 104 54 50 134 133 1 Nursing-Home Care 6346 3605 2741 55 29 26 1589 877 712 4702 2699 2003 Other Health Services 2875 2114 762 786 497 289 1679 1346 333 410 271 138

1970

Total $22442 $14561 $7881 $2479 $1471 $1008 $9389 $4228 $5161 $10577 $8864 $1713

Hospital Care 14572 9424 5148 1438 837 601 6885 3025 3860 6348 5561 687 PhysiciansServices 3087 2230 860 286 157 129 940 286 654 1864 1787 77 DentistsServices 223 130 93 77 41 36 119 73 46 27 16 11 Other Professional Services 221 140 79 39 24 15 76 25 51 104 91 13 Drugs and Drug Sundries 484 240 246 67 36 31 211 99 112 208 105 103 Eyeglasses and Appliances 107 77 30 12 7 5 46 22 24 49 48 1 Nursing-Home Care 2282 1344 938 61 28 33 332 156 176 1889 1160 729 Other Health Services 1466 976 489 499 341 158 779 541 238 186 94 92

1965

Total $7880 $3787 $4093 $992 $603 $389 $4231 $1817 $2414 $2656 $1367 $1289

Hospital Care 5395 2429 2966 620 364 256 3155 1344 1811 1619 721 898 PhysiciansServices 583 150 433 39 25 14 424 54 370 120 71 49 DentistsServices 49 32 17 19 12 7 18 12 6 12 8 4 Other Professional Services 37 12 25 6 3 3 23 4 19 8 5 3 Drugs and Drug Sundries 196 120 76 15 10 5 63 34 29 118 76 42 Eyeglasses and Appliances 30 14 16 4 2 2 24 10 14 2 2 mdash Nursing-Home Care 712 460 252 mdash mdash mdash 74 48 26 638 412 226 Other Health Services 877 570 308 289 187 102 449 311 139 137 72 67

8 6 HEALTH CARE FINANCING REVIEW SPRING 1980

TABLE C

Estimated Personal Health Care Expenditures for Health Services and Supplies under Public Programs by Program for Three Age Groups for Calendar Years 19781977197619701965

(in millions)

1978 1977 1976Type of Program Under 65 and Under 65 and Under 65 and

Total 19 19-64 Over Total 19 19-64 Over Total 19 19-64 Over

All public programs $65042 $5696 $28172 $31175 $58091 $5206 $25196 $27690 $51596 $4801 $22494 $24302 Federal 46503 3757 15968 26780 41096 3413 13994 23689 36283 3194 12493 20595 State and Local 18539 1939 12204 4395 16996 1793 11203 4001 15314 1607 10001 3707

Major Program Areas Medicare 24919 30 3114 21775 21768 25 2602 19141 18417 17 2087 16313

(Federal)

Medicaid 18365 3142 8612 6611 16657 2849 7812 5996 14849 2534 6673 5642 Federal 10234 1751 4799 3684 9384 1605 4401 3378 8391 1432 3771 3188 State and Local 8131 1391 3813 2927 7273 1244 3411 2618 6458 1102 2902 2454

Other Medical Public Assistance Federal mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash State and Local 1157 100 665 391 1098 93 626 380 1048 83 594 371

Veterans Administration 4943 mdash 3890 1053 4360 mdash 3431 929 4111 mdash 3235 876

(Federal)

Department of Defense 3625 823 2671 131 2336 788 2437 112 3230 811 2327 92 (Federal)

Workers Compensation 3061 mdash 2968 93 2663 mdash 2583 80 2325 mdash 2255 70 (Medical Benefits) mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash Federal Employees 117 mdash 113 4 79 mdash 77 2 69 mdash 67 2 State and Local Programs 2944 mdash 2855 89 2584 mdash 2506 78 2256 mdash 2188 68

State and Local Hospitals 5488 85 4461 942 5170 88 4212 870 4749 83 3898 768 (Net)

Other Public Expenditures for Personal Health Care 3484 1515 1787 182 3039 1363 1493 183 2867 1273 1425 168

Federal 2665 1151 1378 136 2169 995 1043 131 2065 935 1008 122 State and Local 819 364 409 46 870 368 450 52 802 338 417 46

HEALTH CARE FINANCING REVIEW SPRING 1980 87

TABLE C (CONTINUED)

Estimated Personal Health Care Expenditures for Health Services and Supplies under Public Programs by Program for Three Age Groups for Calendar Years 19781977197619701965

(in millions)

Type of Programs 1970 1965 Under 65 and Under 65 and

Total _ _ 1 9 _ _ 19-64__ Over Total _ _ 19_ 19-64 Over

All public programs $22442 $2502 $9341 $10600 $7880 $992 $4231 $2657 Federal 14561 1484 4215 8864 3787 603 1817 1367 State and Local 7881 1018 5126 1736 4093 389 2414 1290

Major Program Areas Medicare 7099 mdash mdash 7099 mdash mdash - mdash

(Federal)

Medicaid 5105 913 2298 1894 mdash mdash mdash mdash Federal 2795 500 1258 1037 mdash mdash mdash mdash State and Local 2310 413 1040 857 mdash mdash mdash mdash

Other Medical Public Assistance 849 82 231 536 2113 217 275 1621 Federal 243 mdash mdash 243 1359 140 177 1043 State and Local 606 82 231 293 753 77 98 578

Veterans Administration 1745 mdash 1374 372 1133 mdash 892 241 (Federal)

Department of Defense 1875 656 1162 56 1012 354 627 30 (Federal)

Workers Compensation (Medical Benefits) 1044 mdash 1010 34 604 mdash 585 19 Federal Employees 23 mdash 22 1 12 mdash 12 mdash

State and Local Programs 1021 mdash 988 33 592 mdash 573 19

State and Local Hospitals 3341 316 2550 476 2378 185 1545 648 (Net)

Other Public Expenditures for Personal Health Care 1383 534 716 133 640 237 308 97

Federal 781 327 399 56 269 109 109 52 State and Local 602 207 317 77 372 128 199 44

HEALTH CARE FINANCING REVIEWSPRING 1980 88

TABLE D

Estimated Amount and Percentage Distribution of Personal Health Care Expenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 19781977197619701965

Amount (in millions) Percentage Distribution Public Public

Medishy Medishy Medishy Medi-Total Private Total care caid Other Total Private Total care caid Other

1978

Total $49366 $18192 $31175 $21775 $6611 $2789 1000 368 632 441 134 57

Hospital CarePhysicians Services

21169 8910

2645 3620

18524 5290

15799 4954

754 260

1971 76

1000 1000

125 406

875 594

746 556

36 29

93 9

DentistsServices 1383 1338 45 mdash 34 11 1000 968 32 mdash 24 8 Other Professional Services 1090 631 459 381 72 6 1000 579 421 350 66 6 Drugs and Drug Sundries 3231 2728 503 mdash 468 35 1000 844 156 mdash 145 11 Eyeglasses and AppliancesNursing-Home CareOther Health Services

605 12624

354

405 6790 35

201 5834 319

189 380 72

mdash 4969 54

12 485 193

1000 1000 1000

669 538 99

332 462 901

312 30 203

_ 394 153

20 38 545

1977

Total $43303 $15613 $27690 $19141 $5999 $2552 1000 361 639 442 139 59

Hospital Care 18897 2259 16638 14119 737 1782 1000 120 880 747 39 94 Physicians ServicesDentistsServices

7623 1188

3186 1142

4437 46

4132 mdash

236 33

69 13

1000 1000

418 961

582 39

542 mdash

31 28

9 11

Other Professional Services 940 555 385 316 62 7 1000 590 410 336 66 7 Drugs and Drug SundriesEyeglasses and AppliancesNursing-Home CareOther Health Services

2941 535

10847 332

2475 374 5587 33

466 161 5260 299

mdash 152 364 58

432 mdash 4439 60

34 9 457 181

1000 1000 1000 1000

842 699 515 100

158 301 485 901

mdash 284 34 175

147 mdash 409 181

11 17 42 545

1976

Total $37674 $13372 $24302 $16313 $5644 $2345 1000 355 645 433 150 62

Hospital Care 16305 1831 14474 12095 756 1623 1000 112 888 742 46 100 PhysiciansServicesDentistsServices

6505 1013

2746 967

3759 46

3474 mdash

221 32

64 14

1000 1000

422 954

578 46

534 mdash

34 32

10 14

Other Professional Services 810 485 325 252 67 6 1000 599 401 311 83 7 Drugs and Drug SundriesEyeglasses and AppliancesNursing-Home CareOther Health Services

2716 490

9395 440

2263 357 4693 30

453 134 4702 410

mdash 125 320 47

419 mdash 3964 185

34 9 418 178

1000 1000 1000 1000

833 728 500 68

167 273 500 932

mdash 255 34 10

154 mdash 422 420

13 18 44 405

1970

Total $17270 $6694 $10577 $7099 $1894 $1584 1000 388 612 411 110 92

Hospital Care 7054 806 6248 4974 405 869 1000 114 886 705 57 123 PhysiciansServicesDentists Services

3030 413

1166 386

1864 27

1718 mdash

115 19

31 9

1000 1000

385 935

615 65

567 mdash

38 46

10 22

Other Professional Services 389 285 104 79 22 3 1000 733 267 203 57 8 Drugs and Drug Sundries 1732 1524 208 mdash 190 18 1000 880 120 shy 110 10 Eyeglasses and Appliances 304 255 49 45 mdash 4 1000 839 161 148 mdash 13 Nursing-Home CareOther Health Services

4144 204

2255 18

1889 186

265 17

1112 31

512 138

1000 1000

544 88

456 912

64 83

268 152

124 677

1965

Total $8869 $6213 $2656 mdash shy $2656 1000 700 300 shy shy 300

Hospital Care 3296 1677 1619 mdash shy 1619 1000 509 491 shy shy 491 PhysiciansServicesDentistsServices

1737 213

1617 201

120 12

mdash mdash

shymdash 120

12 1000 1000

931 944

69 56

mdash mdash

mdash mdash

69 56

Other Professional Services 244 236 8 mdash mdash 8 1000 967 33 mdash mdash 33 Drugs and Drug SundriesEyeglasses and AppliancesNursing-Home CareOther Health Services

1148 256

1825 150

1030 254 1187 13

118 2 638 137

mdash mdash mdash mdash

mdash mdash shy

shy

118 2

638 137

1000 1000 1000 1000

897 992 650 87

103 8 350 913

mdash mdash shy

shy

mdash mdash

shyshy

103 8

350 913

HEALTH CARE FINANCING REVIEW SPRING 1980 89

References

Characteristics of Aged Institutionalized Enrollees 1973-Current Medicare Survey Ronald Deacon October 31 1977

Cost of Living Council Health Care Final Phase IV Regulashytions Vol 39 No 16 1974

Current Estimates from the Health Interview Survey 1978 Series 10 No 130 NCHS

Health Characteristics of Persons with Chronic Activity Limitations United Statesmdash1974 Series 10 No 112 NCHS

Medicare Summary Utilization and Reimbursement by Pershyson 1967 1968 1969 1976 HCFA

The National Ambulatory Medical Care Survey 1975 Sumshymary Series 13 No 33 NCHS

National Health Expenditures 1978 Robert Gibson Health Care Financing Review Summer 1979

National Health Insurance Issues The Cost of a National Prescription Program Gordon Trapnell 1979

National Nursing Home Survey 1977 Series 13 No 43 NCHS

Panel Survey American Hospital Association unpublished data 1966-1978

Patient Charges in Short-Stay Hospitals United States 1968-1970 Series 13 No 15 NCHS

Private Health Insurance Plans in 1977 Coverage Enrollshyment and Financial Experience Marjorie Smith Carroll and Ross Arnett III Health Care Financing Review Fall 1979

Time Cells and Aging Bernard Strehler 1977

Time trend data for Medicare hospital admissions and surgical rates from unpublished Medicare data HCFA 1976

Two Decades of Health Services Social Survey Trends In Use and Expenditure Anderson et al 1976

Utilization of Short-Stay HospitalsmdashAnnual Summary for the United States 1977 Series 13 No 41 NCHS

Utilization of Short-Stay HospitalsmdashUnited States 1967 Series 13 No 9 NCHS

9 0 HEALTH CARE FINANCING REVIEW SPRING 1980

TABLE A (CONTINUED)

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1970

All Ages Under 19 19-64 65 and Over

Type of Expendi ture Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate Amount (in millions)

Total $65723 $43281 $22442 $10356 $7878 $2479 $38096 $28708 $9389 $17270 $6694 $10577

Hospital Care 27799 13227 14572 3439 2001 1438 17306 10421 6885 7054 806 6248 PhysiciansServices 14340 11253 3087 2737 2451 286 8573 7633 940 3030 1166 1864 DentistsServices 4750 4526 223 1188 1111 77 3149 3030 119 413 386 27 Other Professional Services 1595 1374 221 183 144 39 1022 946 76 389 285 104 Drugs and Drug Sundries 8406 7922 484 1883 1816 67 4791 4580 211 1732 1524 208 Eyeglasses and Appliances 2099 1992 107 309 297 12 1486 1440 46 304 255 49 Nursing-Home Care 4677 2395 2282 61 mdash 61 472 140 332 4144 2255 1889 Other Health Services 2058 592 1466 556 57 499 1297 518 779 204 18 186

Per Capita Amount Total $31537 $20768 $10769 $13768 $10473 $3296 $33727 $25415 $8312 $85381 $33100 $52280

Hospital Care 13339 6347 6992 4572 2660 1912 15321 9226 6095 34874 3985 30889 Physicians Services 6881 5400 1481 3639 3258 380 7590 6758 832 14980 5765 9215 Dentists Services 2280 2172 107 1580 1477 102 2788 2682 105 2042 1908 133 Other Professional Services 765 659 106 243 191 52 905 837 67 1923 1409 514 Drugs and Drug Sundries 4034 3801 232 2503 2414 89 4242 4055 187 8563 7534 1028 Eyeglasses and Appliances 1007 956 51 411 395 16 1316 1275 41 1503 1261 242 Nursing-Home Care 2244 1149 1095 81 mdash 81 418 124 294 20487 11148 9339 Other Health Services 990 284 703 739 76 663 1148 459 690 1009 90 920

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 423 306 649 332 254 580 454 363 733 408 120 591 PhysiciansServices 218 260 138 264 311 115 225 266 100 175 174 176 DentistsServices 72 105 10 115 141 31 83 106 13 24 58 3 Other Professional Services 24 32 10 18 18 16 27 33 8 23 43 10 Drugs and Drug Sundries 128 183 22 182 231 27 126 160 22 100 228 20 Eyeglasses and Appliances 32 46 5 30 38 5 39 50 5 18 38 5 Nursing-Home Care 71 55 102 6 mdash 25 12 5 35 240 337 179 Other Health Services 31 14 65 54 7 201 34 18 83 12 3 18

8 4 HEALTH CARE FINANCING REVIEW SPRING 1980

TABLE A (CONTINUED)

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1965

All Ages Under 19 19-64 65 and Over

Type of Expendi ture Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate amount (In millions)

Total $37267 $29387 $7880 $6383 $5391 $992 $22012 $17781 $4231 $8869 $6213 $2656

Hospital Care 13935 8539 5395 1731 1111 620 8908 5753 3155 3296 1677 1619 PhysiciansServices 8474 7890 583 1712 1673 39 5025 4601 424 1737 1617 120 DentistsServices 2809 2760 49 772 753 19 1823 1805 18 213 201 12 Other Professional Services 1033 996 37 135 129 6 654 631 23 244 236 8 Drugs and Drug Sundries 5771 5575 196 1397 1382 15 3226 3163 63 1148 1030 118 Eyeglasses and Appliances 1866 1836 30 306 302 4 1305 1281 24 256 254 2 Nursing-Home Care 2072 1360 712 mdash mdash mdash 247 173 74 1825 1187 638 Other Health Services 1306 429 877 330 41 289 824 375 449 150 13 137

Per Capita Amount Total $18843 $14859 $3984 $8302 $7012 $1290 $21558 $17414 $4143 $47231 $33097 $14135

Hospital Care 7046 4318 2728 2251 1445 806 8724 5634 3090 17552 8931 8622 PhysiciansServices 4285 3989 295 2227 2176 51 4921 4506 415 9250 8611 639 DentistsServices 1420 1396 24 1004 979 25 1785 1768 18 1130 1070 64 Other Professional Services 522 504 19 176 168 08 641 618 23 1299 1257 43 Drugs and Drug Sundries 2918 2819 99 1817 1798 20 3160 3098 62 6114 5485 628 Eyeglasses and Appliances 944 928 15 398 393 05 1278 1255 24 1363 1353 11 Nursing-Home Care 1048 688 360 mdash mdash mdash 242 169 72 9719 6321 3398 Other Health Services 660 217 443 429 53 376 807 367 440 799 69 730

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 374 291 685 271 206 625 405 324 746 372 270 610 Physicians Services 227 268 74 268 310 40 228 259 100 196 260 45 DentistsServices 75 94 6 121 140 19 83 102 4 24 32 5 Other Professional Services 28 34 5 21 24 6 30 35 6 28 38 3 Drugs and Drug Sundries 155 190 25 219 256 16 147 178 15 129 166 44 Eyeglasses and Appliances 50 62 4 48 56 4 59 72 6 29 41 1 Nursing-Home Care 56 46 90 mdash mdash mdash 11 10 17 206 191 240 Other Health Services 35 15 111 52 8 291 37 21 106 17 2 52

HEALTH CARE FINANCING REVIEW SPRING 1980 85

TABLE B

Estimated Personal Health Care Expenditures under Public Programs by Type of Expenditure and Source of Funds for Three Age Groups for Calendar Years 19781977197619701965

(in millions)

All Ages Under 19 19-64 65 and Over

State amp State amp State amp State amp Type of Expendi ture Total Federal Local Total Federal Local Total Federal Local Total Federal Local

1978

Total $65042 $46503 $18539 $5696 $3757 $1939 $28172 $15968 $12204 $31175 $26780 $4395

Hospital Care 40919 30344 10574 3235 2293 942 19159 10886 8273 18524 17165 1359 PhysiciansServices 9439 7066 2374 833 485 348 3316 1461 1855 5290 5120 170 DentistsServices 539 310 229 234 126 108 261 155 106 45 28 17 Other Professional Services 972 677 295 205 118 87 307 138 169 459 421 38 Drugs and Drug Sundries 1300 667 634 173 96 77 625 308 317 503 264 239 Eyeglasses and Appliances 357 285 72 22 15 7 134 71 63 201 199 2 Nursing-Home Care 8358 4715 3643 67 35 32 2457 1344 1113 5834 3336 2498 Other Health Services 3158 2440 719 927 589 338 1913 1605 308 319 247 72

1977 Total $58091 $41096 $16996 $5206 $3413 $1793 $25196 $13994 $11203 $27690 $23689 $4001

Hospital Care 36950 27141 9809 2973 2112 861 17340 9655 7685 16638 15373 1263 PhysiciansServices 8106 5995 2111 744 435 309 2925 1275 1650 4437 4284 153 DentistsServices 504 295 209 214 117 97 245 148 97 46 29 17 Other Professional Services 841 570 271 180 105 75 277 115 162 385 351 34 Drugs and Drug Sundries 1196 619 577 151 84 67 579 289 290 466 246 220 Eyeglasses and Appliances 297 234 63 21 14 7 113 59 54 161 159 2 Nursing-Home Care 7278 4141 3137 59 31 28 1959 1081 878 5260 3030 2230 Other Health Services 2920 2101 818 865 515 350 1759 1372 387 299 217 82

1976

Total $51596 $36283 $15314 $4801 $3194 $1607 $22494 $12493 $10001 $24302 $20595 $3707

Hospital Care 32769 23880 8890 2731 1961 770 15567 8604 6963 14474 13316 1158 PhysiciansServices 7066 5143 1923 726 422 304 2583 1105 1478 3759 3616 143 DentistsServices 483 286 197 212 115 97 225 141 84 46 30 16 Other Professional Services 657 462 195 116 71 45 215 101 114 325 290 35 Drugs and Drug Sundries 1142 593 549 157 87 70 533 266 267 453 240 213 Eyeglasses and Appliances 258 201 57 19 13 6 104 54 50 134 133 1 Nursing-Home Care 6346 3605 2741 55 29 26 1589 877 712 4702 2699 2003 Other Health Services 2875 2114 762 786 497 289 1679 1346 333 410 271 138

1970

Total $22442 $14561 $7881 $2479 $1471 $1008 $9389 $4228 $5161 $10577 $8864 $1713

Hospital Care 14572 9424 5148 1438 837 601 6885 3025 3860 6348 5561 687 PhysiciansServices 3087 2230 860 286 157 129 940 286 654 1864 1787 77 DentistsServices 223 130 93 77 41 36 119 73 46 27 16 11 Other Professional Services 221 140 79 39 24 15 76 25 51 104 91 13 Drugs and Drug Sundries 484 240 246 67 36 31 211 99 112 208 105 103 Eyeglasses and Appliances 107 77 30 12 7 5 46 22 24 49 48 1 Nursing-Home Care 2282 1344 938 61 28 33 332 156 176 1889 1160 729 Other Health Services 1466 976 489 499 341 158 779 541 238 186 94 92

1965

Total $7880 $3787 $4093 $992 $603 $389 $4231 $1817 $2414 $2656 $1367 $1289

Hospital Care 5395 2429 2966 620 364 256 3155 1344 1811 1619 721 898 PhysiciansServices 583 150 433 39 25 14 424 54 370 120 71 49 DentistsServices 49 32 17 19 12 7 18 12 6 12 8 4 Other Professional Services 37 12 25 6 3 3 23 4 19 8 5 3 Drugs and Drug Sundries 196 120 76 15 10 5 63 34 29 118 76 42 Eyeglasses and Appliances 30 14 16 4 2 2 24 10 14 2 2 mdash Nursing-Home Care 712 460 252 mdash mdash mdash 74 48 26 638 412 226 Other Health Services 877 570 308 289 187 102 449 311 139 137 72 67

8 6 HEALTH CARE FINANCING REVIEW SPRING 1980

TABLE C

Estimated Personal Health Care Expenditures for Health Services and Supplies under Public Programs by Program for Three Age Groups for Calendar Years 19781977197619701965

(in millions)

1978 1977 1976Type of Program Under 65 and Under 65 and Under 65 and

Total 19 19-64 Over Total 19 19-64 Over Total 19 19-64 Over

All public programs $65042 $5696 $28172 $31175 $58091 $5206 $25196 $27690 $51596 $4801 $22494 $24302 Federal 46503 3757 15968 26780 41096 3413 13994 23689 36283 3194 12493 20595 State and Local 18539 1939 12204 4395 16996 1793 11203 4001 15314 1607 10001 3707

Major Program Areas Medicare 24919 30 3114 21775 21768 25 2602 19141 18417 17 2087 16313

(Federal)

Medicaid 18365 3142 8612 6611 16657 2849 7812 5996 14849 2534 6673 5642 Federal 10234 1751 4799 3684 9384 1605 4401 3378 8391 1432 3771 3188 State and Local 8131 1391 3813 2927 7273 1244 3411 2618 6458 1102 2902 2454

Other Medical Public Assistance Federal mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash State and Local 1157 100 665 391 1098 93 626 380 1048 83 594 371

Veterans Administration 4943 mdash 3890 1053 4360 mdash 3431 929 4111 mdash 3235 876

(Federal)

Department of Defense 3625 823 2671 131 2336 788 2437 112 3230 811 2327 92 (Federal)

Workers Compensation 3061 mdash 2968 93 2663 mdash 2583 80 2325 mdash 2255 70 (Medical Benefits) mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash Federal Employees 117 mdash 113 4 79 mdash 77 2 69 mdash 67 2 State and Local Programs 2944 mdash 2855 89 2584 mdash 2506 78 2256 mdash 2188 68

State and Local Hospitals 5488 85 4461 942 5170 88 4212 870 4749 83 3898 768 (Net)

Other Public Expenditures for Personal Health Care 3484 1515 1787 182 3039 1363 1493 183 2867 1273 1425 168

Federal 2665 1151 1378 136 2169 995 1043 131 2065 935 1008 122 State and Local 819 364 409 46 870 368 450 52 802 338 417 46

HEALTH CARE FINANCING REVIEW SPRING 1980 87

TABLE C (CONTINUED)

Estimated Personal Health Care Expenditures for Health Services and Supplies under Public Programs by Program for Three Age Groups for Calendar Years 19781977197619701965

(in millions)

Type of Programs 1970 1965 Under 65 and Under 65 and

Total _ _ 1 9 _ _ 19-64__ Over Total _ _ 19_ 19-64 Over

All public programs $22442 $2502 $9341 $10600 $7880 $992 $4231 $2657 Federal 14561 1484 4215 8864 3787 603 1817 1367 State and Local 7881 1018 5126 1736 4093 389 2414 1290

Major Program Areas Medicare 7099 mdash mdash 7099 mdash mdash - mdash

(Federal)

Medicaid 5105 913 2298 1894 mdash mdash mdash mdash Federal 2795 500 1258 1037 mdash mdash mdash mdash State and Local 2310 413 1040 857 mdash mdash mdash mdash

Other Medical Public Assistance 849 82 231 536 2113 217 275 1621 Federal 243 mdash mdash 243 1359 140 177 1043 State and Local 606 82 231 293 753 77 98 578

Veterans Administration 1745 mdash 1374 372 1133 mdash 892 241 (Federal)

Department of Defense 1875 656 1162 56 1012 354 627 30 (Federal)

Workers Compensation (Medical Benefits) 1044 mdash 1010 34 604 mdash 585 19 Federal Employees 23 mdash 22 1 12 mdash 12 mdash

State and Local Programs 1021 mdash 988 33 592 mdash 573 19

State and Local Hospitals 3341 316 2550 476 2378 185 1545 648 (Net)

Other Public Expenditures for Personal Health Care 1383 534 716 133 640 237 308 97

Federal 781 327 399 56 269 109 109 52 State and Local 602 207 317 77 372 128 199 44

HEALTH CARE FINANCING REVIEWSPRING 1980 88

TABLE D

Estimated Amount and Percentage Distribution of Personal Health Care Expenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 19781977197619701965

Amount (in millions) Percentage Distribution Public Public

Medishy Medishy Medishy Medi-Total Private Total care caid Other Total Private Total care caid Other

1978

Total $49366 $18192 $31175 $21775 $6611 $2789 1000 368 632 441 134 57

Hospital CarePhysicians Services

21169 8910

2645 3620

18524 5290

15799 4954

754 260

1971 76

1000 1000

125 406

875 594

746 556

36 29

93 9

DentistsServices 1383 1338 45 mdash 34 11 1000 968 32 mdash 24 8 Other Professional Services 1090 631 459 381 72 6 1000 579 421 350 66 6 Drugs and Drug Sundries 3231 2728 503 mdash 468 35 1000 844 156 mdash 145 11 Eyeglasses and AppliancesNursing-Home CareOther Health Services

605 12624

354

405 6790 35

201 5834 319

189 380 72

mdash 4969 54

12 485 193

1000 1000 1000

669 538 99

332 462 901

312 30 203

_ 394 153

20 38 545

1977

Total $43303 $15613 $27690 $19141 $5999 $2552 1000 361 639 442 139 59

Hospital Care 18897 2259 16638 14119 737 1782 1000 120 880 747 39 94 Physicians ServicesDentistsServices

7623 1188

3186 1142

4437 46

4132 mdash

236 33

69 13

1000 1000

418 961

582 39

542 mdash

31 28

9 11

Other Professional Services 940 555 385 316 62 7 1000 590 410 336 66 7 Drugs and Drug SundriesEyeglasses and AppliancesNursing-Home CareOther Health Services

2941 535

10847 332

2475 374 5587 33

466 161 5260 299

mdash 152 364 58

432 mdash 4439 60

34 9 457 181

1000 1000 1000 1000

842 699 515 100

158 301 485 901

mdash 284 34 175

147 mdash 409 181

11 17 42 545

1976

Total $37674 $13372 $24302 $16313 $5644 $2345 1000 355 645 433 150 62

Hospital Care 16305 1831 14474 12095 756 1623 1000 112 888 742 46 100 PhysiciansServicesDentistsServices

6505 1013

2746 967

3759 46

3474 mdash

221 32

64 14

1000 1000

422 954

578 46

534 mdash

34 32

10 14

Other Professional Services 810 485 325 252 67 6 1000 599 401 311 83 7 Drugs and Drug SundriesEyeglasses and AppliancesNursing-Home CareOther Health Services

2716 490

9395 440

2263 357 4693 30

453 134 4702 410

mdash 125 320 47

419 mdash 3964 185

34 9 418 178

1000 1000 1000 1000

833 728 500 68

167 273 500 932

mdash 255 34 10

154 mdash 422 420

13 18 44 405

1970

Total $17270 $6694 $10577 $7099 $1894 $1584 1000 388 612 411 110 92

Hospital Care 7054 806 6248 4974 405 869 1000 114 886 705 57 123 PhysiciansServicesDentists Services

3030 413

1166 386

1864 27

1718 mdash

115 19

31 9

1000 1000

385 935

615 65

567 mdash

38 46

10 22

Other Professional Services 389 285 104 79 22 3 1000 733 267 203 57 8 Drugs and Drug Sundries 1732 1524 208 mdash 190 18 1000 880 120 shy 110 10 Eyeglasses and Appliances 304 255 49 45 mdash 4 1000 839 161 148 mdash 13 Nursing-Home CareOther Health Services

4144 204

2255 18

1889 186

265 17

1112 31

512 138

1000 1000

544 88

456 912

64 83

268 152

124 677

1965

Total $8869 $6213 $2656 mdash shy $2656 1000 700 300 shy shy 300

Hospital Care 3296 1677 1619 mdash shy 1619 1000 509 491 shy shy 491 PhysiciansServicesDentistsServices

1737 213

1617 201

120 12

mdash mdash

shymdash 120

12 1000 1000

931 944

69 56

mdash mdash

mdash mdash

69 56

Other Professional Services 244 236 8 mdash mdash 8 1000 967 33 mdash mdash 33 Drugs and Drug SundriesEyeglasses and AppliancesNursing-Home CareOther Health Services

1148 256

1825 150

1030 254 1187 13

118 2 638 137

mdash mdash mdash mdash

mdash mdash shy

shy

118 2

638 137

1000 1000 1000 1000

897 992 650 87

103 8 350 913

mdash mdash shy

shy

mdash mdash

shyshy

103 8

350 913

HEALTH CARE FINANCING REVIEW SPRING 1980 89

References

Characteristics of Aged Institutionalized Enrollees 1973-Current Medicare Survey Ronald Deacon October 31 1977

Cost of Living Council Health Care Final Phase IV Regulashytions Vol 39 No 16 1974

Current Estimates from the Health Interview Survey 1978 Series 10 No 130 NCHS

Health Characteristics of Persons with Chronic Activity Limitations United Statesmdash1974 Series 10 No 112 NCHS

Medicare Summary Utilization and Reimbursement by Pershyson 1967 1968 1969 1976 HCFA

The National Ambulatory Medical Care Survey 1975 Sumshymary Series 13 No 33 NCHS

National Health Expenditures 1978 Robert Gibson Health Care Financing Review Summer 1979

National Health Insurance Issues The Cost of a National Prescription Program Gordon Trapnell 1979

National Nursing Home Survey 1977 Series 13 No 43 NCHS

Panel Survey American Hospital Association unpublished data 1966-1978

Patient Charges in Short-Stay Hospitals United States 1968-1970 Series 13 No 15 NCHS

Private Health Insurance Plans in 1977 Coverage Enrollshyment and Financial Experience Marjorie Smith Carroll and Ross Arnett III Health Care Financing Review Fall 1979

Time Cells and Aging Bernard Strehler 1977

Time trend data for Medicare hospital admissions and surgical rates from unpublished Medicare data HCFA 1976

Two Decades of Health Services Social Survey Trends In Use and Expenditure Anderson et al 1976

Utilization of Short-Stay HospitalsmdashAnnual Summary for the United States 1977 Series 13 No 41 NCHS

Utilization of Short-Stay HospitalsmdashUnited States 1967 Series 13 No 9 NCHS

9 0 HEALTH CARE FINANCING REVIEW SPRING 1980

TABLE A (CONTINUED)

Personal Health Care Expenditures for Three Age Groups Aggregate and Per Capita Amount and Percentage Distribution by Type of Expenditure and Source of Funds for Calendar Year 1965

All Ages Under 19 19-64 65 and Over

Type of Expendi ture Total Private Public Total Private Public Total Private Public Total Private Public

Aggregate amount (In millions)

Total $37267 $29387 $7880 $6383 $5391 $992 $22012 $17781 $4231 $8869 $6213 $2656

Hospital Care 13935 8539 5395 1731 1111 620 8908 5753 3155 3296 1677 1619 PhysiciansServices 8474 7890 583 1712 1673 39 5025 4601 424 1737 1617 120 DentistsServices 2809 2760 49 772 753 19 1823 1805 18 213 201 12 Other Professional Services 1033 996 37 135 129 6 654 631 23 244 236 8 Drugs and Drug Sundries 5771 5575 196 1397 1382 15 3226 3163 63 1148 1030 118 Eyeglasses and Appliances 1866 1836 30 306 302 4 1305 1281 24 256 254 2 Nursing-Home Care 2072 1360 712 mdash mdash mdash 247 173 74 1825 1187 638 Other Health Services 1306 429 877 330 41 289 824 375 449 150 13 137

Per Capita Amount Total $18843 $14859 $3984 $8302 $7012 $1290 $21558 $17414 $4143 $47231 $33097 $14135

Hospital Care 7046 4318 2728 2251 1445 806 8724 5634 3090 17552 8931 8622 PhysiciansServices 4285 3989 295 2227 2176 51 4921 4506 415 9250 8611 639 DentistsServices 1420 1396 24 1004 979 25 1785 1768 18 1130 1070 64 Other Professional Services 522 504 19 176 168 08 641 618 23 1299 1257 43 Drugs and Drug Sundries 2918 2819 99 1817 1798 20 3160 3098 62 6114 5485 628 Eyeglasses and Appliances 944 928 15 398 393 05 1278 1255 24 1363 1353 11 Nursing-Home Care 1048 688 360 mdash mdash mdash 242 169 72 9719 6321 3398 Other Health Services 660 217 443 429 53 376 807 367 440 799 69 730

Percentage Distribution Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Hospital Care 374 291 685 271 206 625 405 324 746 372 270 610 Physicians Services 227 268 74 268 310 40 228 259 100 196 260 45 DentistsServices 75 94 6 121 140 19 83 102 4 24 32 5 Other Professional Services 28 34 5 21 24 6 30 35 6 28 38 3 Drugs and Drug Sundries 155 190 25 219 256 16 147 178 15 129 166 44 Eyeglasses and Appliances 50 62 4 48 56 4 59 72 6 29 41 1 Nursing-Home Care 56 46 90 mdash mdash mdash 11 10 17 206 191 240 Other Health Services 35 15 111 52 8 291 37 21 106 17 2 52

HEALTH CARE FINANCING REVIEW SPRING 1980 85

TABLE B

Estimated Personal Health Care Expenditures under Public Programs by Type of Expenditure and Source of Funds for Three Age Groups for Calendar Years 19781977197619701965

(in millions)

All Ages Under 19 19-64 65 and Over

State amp State amp State amp State amp Type of Expendi ture Total Federal Local Total Federal Local Total Federal Local Total Federal Local

1978

Total $65042 $46503 $18539 $5696 $3757 $1939 $28172 $15968 $12204 $31175 $26780 $4395

Hospital Care 40919 30344 10574 3235 2293 942 19159 10886 8273 18524 17165 1359 PhysiciansServices 9439 7066 2374 833 485 348 3316 1461 1855 5290 5120 170 DentistsServices 539 310 229 234 126 108 261 155 106 45 28 17 Other Professional Services 972 677 295 205 118 87 307 138 169 459 421 38 Drugs and Drug Sundries 1300 667 634 173 96 77 625 308 317 503 264 239 Eyeglasses and Appliances 357 285 72 22 15 7 134 71 63 201 199 2 Nursing-Home Care 8358 4715 3643 67 35 32 2457 1344 1113 5834 3336 2498 Other Health Services 3158 2440 719 927 589 338 1913 1605 308 319 247 72

1977 Total $58091 $41096 $16996 $5206 $3413 $1793 $25196 $13994 $11203 $27690 $23689 $4001

Hospital Care 36950 27141 9809 2973 2112 861 17340 9655 7685 16638 15373 1263 PhysiciansServices 8106 5995 2111 744 435 309 2925 1275 1650 4437 4284 153 DentistsServices 504 295 209 214 117 97 245 148 97 46 29 17 Other Professional Services 841 570 271 180 105 75 277 115 162 385 351 34 Drugs and Drug Sundries 1196 619 577 151 84 67 579 289 290 466 246 220 Eyeglasses and Appliances 297 234 63 21 14 7 113 59 54 161 159 2 Nursing-Home Care 7278 4141 3137 59 31 28 1959 1081 878 5260 3030 2230 Other Health Services 2920 2101 818 865 515 350 1759 1372 387 299 217 82

1976

Total $51596 $36283 $15314 $4801 $3194 $1607 $22494 $12493 $10001 $24302 $20595 $3707

Hospital Care 32769 23880 8890 2731 1961 770 15567 8604 6963 14474 13316 1158 PhysiciansServices 7066 5143 1923 726 422 304 2583 1105 1478 3759 3616 143 DentistsServices 483 286 197 212 115 97 225 141 84 46 30 16 Other Professional Services 657 462 195 116 71 45 215 101 114 325 290 35 Drugs and Drug Sundries 1142 593 549 157 87 70 533 266 267 453 240 213 Eyeglasses and Appliances 258 201 57 19 13 6 104 54 50 134 133 1 Nursing-Home Care 6346 3605 2741 55 29 26 1589 877 712 4702 2699 2003 Other Health Services 2875 2114 762 786 497 289 1679 1346 333 410 271 138

1970

Total $22442 $14561 $7881 $2479 $1471 $1008 $9389 $4228 $5161 $10577 $8864 $1713

Hospital Care 14572 9424 5148 1438 837 601 6885 3025 3860 6348 5561 687 PhysiciansServices 3087 2230 860 286 157 129 940 286 654 1864 1787 77 DentistsServices 223 130 93 77 41 36 119 73 46 27 16 11 Other Professional Services 221 140 79 39 24 15 76 25 51 104 91 13 Drugs and Drug Sundries 484 240 246 67 36 31 211 99 112 208 105 103 Eyeglasses and Appliances 107 77 30 12 7 5 46 22 24 49 48 1 Nursing-Home Care 2282 1344 938 61 28 33 332 156 176 1889 1160 729 Other Health Services 1466 976 489 499 341 158 779 541 238 186 94 92

1965

Total $7880 $3787 $4093 $992 $603 $389 $4231 $1817 $2414 $2656 $1367 $1289

Hospital Care 5395 2429 2966 620 364 256 3155 1344 1811 1619 721 898 PhysiciansServices 583 150 433 39 25 14 424 54 370 120 71 49 DentistsServices 49 32 17 19 12 7 18 12 6 12 8 4 Other Professional Services 37 12 25 6 3 3 23 4 19 8 5 3 Drugs and Drug Sundries 196 120 76 15 10 5 63 34 29 118 76 42 Eyeglasses and Appliances 30 14 16 4 2 2 24 10 14 2 2 mdash Nursing-Home Care 712 460 252 mdash mdash mdash 74 48 26 638 412 226 Other Health Services 877 570 308 289 187 102 449 311 139 137 72 67

8 6 HEALTH CARE FINANCING REVIEW SPRING 1980

TABLE C

Estimated Personal Health Care Expenditures for Health Services and Supplies under Public Programs by Program for Three Age Groups for Calendar Years 19781977197619701965

(in millions)

1978 1977 1976Type of Program Under 65 and Under 65 and Under 65 and

Total 19 19-64 Over Total 19 19-64 Over Total 19 19-64 Over

All public programs $65042 $5696 $28172 $31175 $58091 $5206 $25196 $27690 $51596 $4801 $22494 $24302 Federal 46503 3757 15968 26780 41096 3413 13994 23689 36283 3194 12493 20595 State and Local 18539 1939 12204 4395 16996 1793 11203 4001 15314 1607 10001 3707

Major Program Areas Medicare 24919 30 3114 21775 21768 25 2602 19141 18417 17 2087 16313

(Federal)

Medicaid 18365 3142 8612 6611 16657 2849 7812 5996 14849 2534 6673 5642 Federal 10234 1751 4799 3684 9384 1605 4401 3378 8391 1432 3771 3188 State and Local 8131 1391 3813 2927 7273 1244 3411 2618 6458 1102 2902 2454

Other Medical Public Assistance Federal mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash State and Local 1157 100 665 391 1098 93 626 380 1048 83 594 371

Veterans Administration 4943 mdash 3890 1053 4360 mdash 3431 929 4111 mdash 3235 876

(Federal)

Department of Defense 3625 823 2671 131 2336 788 2437 112 3230 811 2327 92 (Federal)

Workers Compensation 3061 mdash 2968 93 2663 mdash 2583 80 2325 mdash 2255 70 (Medical Benefits) mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash Federal Employees 117 mdash 113 4 79 mdash 77 2 69 mdash 67 2 State and Local Programs 2944 mdash 2855 89 2584 mdash 2506 78 2256 mdash 2188 68

State and Local Hospitals 5488 85 4461 942 5170 88 4212 870 4749 83 3898 768 (Net)

Other Public Expenditures for Personal Health Care 3484 1515 1787 182 3039 1363 1493 183 2867 1273 1425 168

Federal 2665 1151 1378 136 2169 995 1043 131 2065 935 1008 122 State and Local 819 364 409 46 870 368 450 52 802 338 417 46

HEALTH CARE FINANCING REVIEW SPRING 1980 87

TABLE C (CONTINUED)

Estimated Personal Health Care Expenditures for Health Services and Supplies under Public Programs by Program for Three Age Groups for Calendar Years 19781977197619701965

(in millions)

Type of Programs 1970 1965 Under 65 and Under 65 and

Total _ _ 1 9 _ _ 19-64__ Over Total _ _ 19_ 19-64 Over

All public programs $22442 $2502 $9341 $10600 $7880 $992 $4231 $2657 Federal 14561 1484 4215 8864 3787 603 1817 1367 State and Local 7881 1018 5126 1736 4093 389 2414 1290

Major Program Areas Medicare 7099 mdash mdash 7099 mdash mdash - mdash

(Federal)

Medicaid 5105 913 2298 1894 mdash mdash mdash mdash Federal 2795 500 1258 1037 mdash mdash mdash mdash State and Local 2310 413 1040 857 mdash mdash mdash mdash

Other Medical Public Assistance 849 82 231 536 2113 217 275 1621 Federal 243 mdash mdash 243 1359 140 177 1043 State and Local 606 82 231 293 753 77 98 578

Veterans Administration 1745 mdash 1374 372 1133 mdash 892 241 (Federal)

Department of Defense 1875 656 1162 56 1012 354 627 30 (Federal)

Workers Compensation (Medical Benefits) 1044 mdash 1010 34 604 mdash 585 19 Federal Employees 23 mdash 22 1 12 mdash 12 mdash

State and Local Programs 1021 mdash 988 33 592 mdash 573 19

State and Local Hospitals 3341 316 2550 476 2378 185 1545 648 (Net)

Other Public Expenditures for Personal Health Care 1383 534 716 133 640 237 308 97

Federal 781 327 399 56 269 109 109 52 State and Local 602 207 317 77 372 128 199 44

HEALTH CARE FINANCING REVIEWSPRING 1980 88

TABLE D

Estimated Amount and Percentage Distribution of Personal Health Care Expenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 19781977197619701965

Amount (in millions) Percentage Distribution Public Public

Medishy Medishy Medishy Medi-Total Private Total care caid Other Total Private Total care caid Other

1978

Total $49366 $18192 $31175 $21775 $6611 $2789 1000 368 632 441 134 57

Hospital CarePhysicians Services

21169 8910

2645 3620

18524 5290

15799 4954

754 260

1971 76

1000 1000

125 406

875 594

746 556

36 29

93 9

DentistsServices 1383 1338 45 mdash 34 11 1000 968 32 mdash 24 8 Other Professional Services 1090 631 459 381 72 6 1000 579 421 350 66 6 Drugs and Drug Sundries 3231 2728 503 mdash 468 35 1000 844 156 mdash 145 11 Eyeglasses and AppliancesNursing-Home CareOther Health Services

605 12624

354

405 6790 35

201 5834 319

189 380 72

mdash 4969 54

12 485 193

1000 1000 1000

669 538 99

332 462 901

312 30 203

_ 394 153

20 38 545

1977

Total $43303 $15613 $27690 $19141 $5999 $2552 1000 361 639 442 139 59

Hospital Care 18897 2259 16638 14119 737 1782 1000 120 880 747 39 94 Physicians ServicesDentistsServices

7623 1188

3186 1142

4437 46

4132 mdash

236 33

69 13

1000 1000

418 961

582 39

542 mdash

31 28

9 11

Other Professional Services 940 555 385 316 62 7 1000 590 410 336 66 7 Drugs and Drug SundriesEyeglasses and AppliancesNursing-Home CareOther Health Services

2941 535

10847 332

2475 374 5587 33

466 161 5260 299

mdash 152 364 58

432 mdash 4439 60

34 9 457 181

1000 1000 1000 1000

842 699 515 100

158 301 485 901

mdash 284 34 175

147 mdash 409 181

11 17 42 545

1976

Total $37674 $13372 $24302 $16313 $5644 $2345 1000 355 645 433 150 62

Hospital Care 16305 1831 14474 12095 756 1623 1000 112 888 742 46 100 PhysiciansServicesDentistsServices

6505 1013

2746 967

3759 46

3474 mdash

221 32

64 14

1000 1000

422 954

578 46

534 mdash

34 32

10 14

Other Professional Services 810 485 325 252 67 6 1000 599 401 311 83 7 Drugs and Drug SundriesEyeglasses and AppliancesNursing-Home CareOther Health Services

2716 490

9395 440

2263 357 4693 30

453 134 4702 410

mdash 125 320 47

419 mdash 3964 185

34 9 418 178

1000 1000 1000 1000

833 728 500 68

167 273 500 932

mdash 255 34 10

154 mdash 422 420

13 18 44 405

1970

Total $17270 $6694 $10577 $7099 $1894 $1584 1000 388 612 411 110 92

Hospital Care 7054 806 6248 4974 405 869 1000 114 886 705 57 123 PhysiciansServicesDentists Services

3030 413

1166 386

1864 27

1718 mdash

115 19

31 9

1000 1000

385 935

615 65

567 mdash

38 46

10 22

Other Professional Services 389 285 104 79 22 3 1000 733 267 203 57 8 Drugs and Drug Sundries 1732 1524 208 mdash 190 18 1000 880 120 shy 110 10 Eyeglasses and Appliances 304 255 49 45 mdash 4 1000 839 161 148 mdash 13 Nursing-Home CareOther Health Services

4144 204

2255 18

1889 186

265 17

1112 31

512 138

1000 1000

544 88

456 912

64 83

268 152

124 677

1965

Total $8869 $6213 $2656 mdash shy $2656 1000 700 300 shy shy 300

Hospital Care 3296 1677 1619 mdash shy 1619 1000 509 491 shy shy 491 PhysiciansServicesDentistsServices

1737 213

1617 201

120 12

mdash mdash

shymdash 120

12 1000 1000

931 944

69 56

mdash mdash

mdash mdash

69 56

Other Professional Services 244 236 8 mdash mdash 8 1000 967 33 mdash mdash 33 Drugs and Drug SundriesEyeglasses and AppliancesNursing-Home CareOther Health Services

1148 256

1825 150

1030 254 1187 13

118 2 638 137

mdash mdash mdash mdash

mdash mdash shy

shy

118 2

638 137

1000 1000 1000 1000

897 992 650 87

103 8 350 913

mdash mdash shy

shy

mdash mdash

shyshy

103 8

350 913

HEALTH CARE FINANCING REVIEW SPRING 1980 89

References

Characteristics of Aged Institutionalized Enrollees 1973-Current Medicare Survey Ronald Deacon October 31 1977

Cost of Living Council Health Care Final Phase IV Regulashytions Vol 39 No 16 1974

Current Estimates from the Health Interview Survey 1978 Series 10 No 130 NCHS

Health Characteristics of Persons with Chronic Activity Limitations United Statesmdash1974 Series 10 No 112 NCHS

Medicare Summary Utilization and Reimbursement by Pershyson 1967 1968 1969 1976 HCFA

The National Ambulatory Medical Care Survey 1975 Sumshymary Series 13 No 33 NCHS

National Health Expenditures 1978 Robert Gibson Health Care Financing Review Summer 1979

National Health Insurance Issues The Cost of a National Prescription Program Gordon Trapnell 1979

National Nursing Home Survey 1977 Series 13 No 43 NCHS

Panel Survey American Hospital Association unpublished data 1966-1978

Patient Charges in Short-Stay Hospitals United States 1968-1970 Series 13 No 15 NCHS

Private Health Insurance Plans in 1977 Coverage Enrollshyment and Financial Experience Marjorie Smith Carroll and Ross Arnett III Health Care Financing Review Fall 1979

Time Cells and Aging Bernard Strehler 1977

Time trend data for Medicare hospital admissions and surgical rates from unpublished Medicare data HCFA 1976

Two Decades of Health Services Social Survey Trends In Use and Expenditure Anderson et al 1976

Utilization of Short-Stay HospitalsmdashAnnual Summary for the United States 1977 Series 13 No 41 NCHS

Utilization of Short-Stay HospitalsmdashUnited States 1967 Series 13 No 9 NCHS

9 0 HEALTH CARE FINANCING REVIEW SPRING 1980

TABLE B

Estimated Personal Health Care Expenditures under Public Programs by Type of Expenditure and Source of Funds for Three Age Groups for Calendar Years 19781977197619701965

(in millions)

All Ages Under 19 19-64 65 and Over

State amp State amp State amp State amp Type of Expendi ture Total Federal Local Total Federal Local Total Federal Local Total Federal Local

1978

Total $65042 $46503 $18539 $5696 $3757 $1939 $28172 $15968 $12204 $31175 $26780 $4395

Hospital Care 40919 30344 10574 3235 2293 942 19159 10886 8273 18524 17165 1359 PhysiciansServices 9439 7066 2374 833 485 348 3316 1461 1855 5290 5120 170 DentistsServices 539 310 229 234 126 108 261 155 106 45 28 17 Other Professional Services 972 677 295 205 118 87 307 138 169 459 421 38 Drugs and Drug Sundries 1300 667 634 173 96 77 625 308 317 503 264 239 Eyeglasses and Appliances 357 285 72 22 15 7 134 71 63 201 199 2 Nursing-Home Care 8358 4715 3643 67 35 32 2457 1344 1113 5834 3336 2498 Other Health Services 3158 2440 719 927 589 338 1913 1605 308 319 247 72

1977 Total $58091 $41096 $16996 $5206 $3413 $1793 $25196 $13994 $11203 $27690 $23689 $4001

Hospital Care 36950 27141 9809 2973 2112 861 17340 9655 7685 16638 15373 1263 PhysiciansServices 8106 5995 2111 744 435 309 2925 1275 1650 4437 4284 153 DentistsServices 504 295 209 214 117 97 245 148 97 46 29 17 Other Professional Services 841 570 271 180 105 75 277 115 162 385 351 34 Drugs and Drug Sundries 1196 619 577 151 84 67 579 289 290 466 246 220 Eyeglasses and Appliances 297 234 63 21 14 7 113 59 54 161 159 2 Nursing-Home Care 7278 4141 3137 59 31 28 1959 1081 878 5260 3030 2230 Other Health Services 2920 2101 818 865 515 350 1759 1372 387 299 217 82

1976

Total $51596 $36283 $15314 $4801 $3194 $1607 $22494 $12493 $10001 $24302 $20595 $3707

Hospital Care 32769 23880 8890 2731 1961 770 15567 8604 6963 14474 13316 1158 PhysiciansServices 7066 5143 1923 726 422 304 2583 1105 1478 3759 3616 143 DentistsServices 483 286 197 212 115 97 225 141 84 46 30 16 Other Professional Services 657 462 195 116 71 45 215 101 114 325 290 35 Drugs and Drug Sundries 1142 593 549 157 87 70 533 266 267 453 240 213 Eyeglasses and Appliances 258 201 57 19 13 6 104 54 50 134 133 1 Nursing-Home Care 6346 3605 2741 55 29 26 1589 877 712 4702 2699 2003 Other Health Services 2875 2114 762 786 497 289 1679 1346 333 410 271 138

1970

Total $22442 $14561 $7881 $2479 $1471 $1008 $9389 $4228 $5161 $10577 $8864 $1713

Hospital Care 14572 9424 5148 1438 837 601 6885 3025 3860 6348 5561 687 PhysiciansServices 3087 2230 860 286 157 129 940 286 654 1864 1787 77 DentistsServices 223 130 93 77 41 36 119 73 46 27 16 11 Other Professional Services 221 140 79 39 24 15 76 25 51 104 91 13 Drugs and Drug Sundries 484 240 246 67 36 31 211 99 112 208 105 103 Eyeglasses and Appliances 107 77 30 12 7 5 46 22 24 49 48 1 Nursing-Home Care 2282 1344 938 61 28 33 332 156 176 1889 1160 729 Other Health Services 1466 976 489 499 341 158 779 541 238 186 94 92

1965

Total $7880 $3787 $4093 $992 $603 $389 $4231 $1817 $2414 $2656 $1367 $1289

Hospital Care 5395 2429 2966 620 364 256 3155 1344 1811 1619 721 898 PhysiciansServices 583 150 433 39 25 14 424 54 370 120 71 49 DentistsServices 49 32 17 19 12 7 18 12 6 12 8 4 Other Professional Services 37 12 25 6 3 3 23 4 19 8 5 3 Drugs and Drug Sundries 196 120 76 15 10 5 63 34 29 118 76 42 Eyeglasses and Appliances 30 14 16 4 2 2 24 10 14 2 2 mdash Nursing-Home Care 712 460 252 mdash mdash mdash 74 48 26 638 412 226 Other Health Services 877 570 308 289 187 102 449 311 139 137 72 67

8 6 HEALTH CARE FINANCING REVIEW SPRING 1980

TABLE C

Estimated Personal Health Care Expenditures for Health Services and Supplies under Public Programs by Program for Three Age Groups for Calendar Years 19781977197619701965

(in millions)

1978 1977 1976Type of Program Under 65 and Under 65 and Under 65 and

Total 19 19-64 Over Total 19 19-64 Over Total 19 19-64 Over

All public programs $65042 $5696 $28172 $31175 $58091 $5206 $25196 $27690 $51596 $4801 $22494 $24302 Federal 46503 3757 15968 26780 41096 3413 13994 23689 36283 3194 12493 20595 State and Local 18539 1939 12204 4395 16996 1793 11203 4001 15314 1607 10001 3707

Major Program Areas Medicare 24919 30 3114 21775 21768 25 2602 19141 18417 17 2087 16313

(Federal)

Medicaid 18365 3142 8612 6611 16657 2849 7812 5996 14849 2534 6673 5642 Federal 10234 1751 4799 3684 9384 1605 4401 3378 8391 1432 3771 3188 State and Local 8131 1391 3813 2927 7273 1244 3411 2618 6458 1102 2902 2454

Other Medical Public Assistance Federal mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash State and Local 1157 100 665 391 1098 93 626 380 1048 83 594 371

Veterans Administration 4943 mdash 3890 1053 4360 mdash 3431 929 4111 mdash 3235 876

(Federal)

Department of Defense 3625 823 2671 131 2336 788 2437 112 3230 811 2327 92 (Federal)

Workers Compensation 3061 mdash 2968 93 2663 mdash 2583 80 2325 mdash 2255 70 (Medical Benefits) mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash Federal Employees 117 mdash 113 4 79 mdash 77 2 69 mdash 67 2 State and Local Programs 2944 mdash 2855 89 2584 mdash 2506 78 2256 mdash 2188 68

State and Local Hospitals 5488 85 4461 942 5170 88 4212 870 4749 83 3898 768 (Net)

Other Public Expenditures for Personal Health Care 3484 1515 1787 182 3039 1363 1493 183 2867 1273 1425 168

Federal 2665 1151 1378 136 2169 995 1043 131 2065 935 1008 122 State and Local 819 364 409 46 870 368 450 52 802 338 417 46

HEALTH CARE FINANCING REVIEW SPRING 1980 87

TABLE C (CONTINUED)

Estimated Personal Health Care Expenditures for Health Services and Supplies under Public Programs by Program for Three Age Groups for Calendar Years 19781977197619701965

(in millions)

Type of Programs 1970 1965 Under 65 and Under 65 and

Total _ _ 1 9 _ _ 19-64__ Over Total _ _ 19_ 19-64 Over

All public programs $22442 $2502 $9341 $10600 $7880 $992 $4231 $2657 Federal 14561 1484 4215 8864 3787 603 1817 1367 State and Local 7881 1018 5126 1736 4093 389 2414 1290

Major Program Areas Medicare 7099 mdash mdash 7099 mdash mdash - mdash

(Federal)

Medicaid 5105 913 2298 1894 mdash mdash mdash mdash Federal 2795 500 1258 1037 mdash mdash mdash mdash State and Local 2310 413 1040 857 mdash mdash mdash mdash

Other Medical Public Assistance 849 82 231 536 2113 217 275 1621 Federal 243 mdash mdash 243 1359 140 177 1043 State and Local 606 82 231 293 753 77 98 578

Veterans Administration 1745 mdash 1374 372 1133 mdash 892 241 (Federal)

Department of Defense 1875 656 1162 56 1012 354 627 30 (Federal)

Workers Compensation (Medical Benefits) 1044 mdash 1010 34 604 mdash 585 19 Federal Employees 23 mdash 22 1 12 mdash 12 mdash

State and Local Programs 1021 mdash 988 33 592 mdash 573 19

State and Local Hospitals 3341 316 2550 476 2378 185 1545 648 (Net)

Other Public Expenditures for Personal Health Care 1383 534 716 133 640 237 308 97

Federal 781 327 399 56 269 109 109 52 State and Local 602 207 317 77 372 128 199 44

HEALTH CARE FINANCING REVIEWSPRING 1980 88

TABLE D

Estimated Amount and Percentage Distribution of Personal Health Care Expenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 19781977197619701965

Amount (in millions) Percentage Distribution Public Public

Medishy Medishy Medishy Medi-Total Private Total care caid Other Total Private Total care caid Other

1978

Total $49366 $18192 $31175 $21775 $6611 $2789 1000 368 632 441 134 57

Hospital CarePhysicians Services

21169 8910

2645 3620

18524 5290

15799 4954

754 260

1971 76

1000 1000

125 406

875 594

746 556

36 29

93 9

DentistsServices 1383 1338 45 mdash 34 11 1000 968 32 mdash 24 8 Other Professional Services 1090 631 459 381 72 6 1000 579 421 350 66 6 Drugs and Drug Sundries 3231 2728 503 mdash 468 35 1000 844 156 mdash 145 11 Eyeglasses and AppliancesNursing-Home CareOther Health Services

605 12624

354

405 6790 35

201 5834 319

189 380 72

mdash 4969 54

12 485 193

1000 1000 1000

669 538 99

332 462 901

312 30 203

_ 394 153

20 38 545

1977

Total $43303 $15613 $27690 $19141 $5999 $2552 1000 361 639 442 139 59

Hospital Care 18897 2259 16638 14119 737 1782 1000 120 880 747 39 94 Physicians ServicesDentistsServices

7623 1188

3186 1142

4437 46

4132 mdash

236 33

69 13

1000 1000

418 961

582 39

542 mdash

31 28

9 11

Other Professional Services 940 555 385 316 62 7 1000 590 410 336 66 7 Drugs and Drug SundriesEyeglasses and AppliancesNursing-Home CareOther Health Services

2941 535

10847 332

2475 374 5587 33

466 161 5260 299

mdash 152 364 58

432 mdash 4439 60

34 9 457 181

1000 1000 1000 1000

842 699 515 100

158 301 485 901

mdash 284 34 175

147 mdash 409 181

11 17 42 545

1976

Total $37674 $13372 $24302 $16313 $5644 $2345 1000 355 645 433 150 62

Hospital Care 16305 1831 14474 12095 756 1623 1000 112 888 742 46 100 PhysiciansServicesDentistsServices

6505 1013

2746 967

3759 46

3474 mdash

221 32

64 14

1000 1000

422 954

578 46

534 mdash

34 32

10 14

Other Professional Services 810 485 325 252 67 6 1000 599 401 311 83 7 Drugs and Drug SundriesEyeglasses and AppliancesNursing-Home CareOther Health Services

2716 490

9395 440

2263 357 4693 30

453 134 4702 410

mdash 125 320 47

419 mdash 3964 185

34 9 418 178

1000 1000 1000 1000

833 728 500 68

167 273 500 932

mdash 255 34 10

154 mdash 422 420

13 18 44 405

1970

Total $17270 $6694 $10577 $7099 $1894 $1584 1000 388 612 411 110 92

Hospital Care 7054 806 6248 4974 405 869 1000 114 886 705 57 123 PhysiciansServicesDentists Services

3030 413

1166 386

1864 27

1718 mdash

115 19

31 9

1000 1000

385 935

615 65

567 mdash

38 46

10 22

Other Professional Services 389 285 104 79 22 3 1000 733 267 203 57 8 Drugs and Drug Sundries 1732 1524 208 mdash 190 18 1000 880 120 shy 110 10 Eyeglasses and Appliances 304 255 49 45 mdash 4 1000 839 161 148 mdash 13 Nursing-Home CareOther Health Services

4144 204

2255 18

1889 186

265 17

1112 31

512 138

1000 1000

544 88

456 912

64 83

268 152

124 677

1965

Total $8869 $6213 $2656 mdash shy $2656 1000 700 300 shy shy 300

Hospital Care 3296 1677 1619 mdash shy 1619 1000 509 491 shy shy 491 PhysiciansServicesDentistsServices

1737 213

1617 201

120 12

mdash mdash

shymdash 120

12 1000 1000

931 944

69 56

mdash mdash

mdash mdash

69 56

Other Professional Services 244 236 8 mdash mdash 8 1000 967 33 mdash mdash 33 Drugs and Drug SundriesEyeglasses and AppliancesNursing-Home CareOther Health Services

1148 256

1825 150

1030 254 1187 13

118 2 638 137

mdash mdash mdash mdash

mdash mdash shy

shy

118 2

638 137

1000 1000 1000 1000

897 992 650 87

103 8 350 913

mdash mdash shy

shy

mdash mdash

shyshy

103 8

350 913

HEALTH CARE FINANCING REVIEW SPRING 1980 89

References

Characteristics of Aged Institutionalized Enrollees 1973-Current Medicare Survey Ronald Deacon October 31 1977

Cost of Living Council Health Care Final Phase IV Regulashytions Vol 39 No 16 1974

Current Estimates from the Health Interview Survey 1978 Series 10 No 130 NCHS

Health Characteristics of Persons with Chronic Activity Limitations United Statesmdash1974 Series 10 No 112 NCHS

Medicare Summary Utilization and Reimbursement by Pershyson 1967 1968 1969 1976 HCFA

The National Ambulatory Medical Care Survey 1975 Sumshymary Series 13 No 33 NCHS

National Health Expenditures 1978 Robert Gibson Health Care Financing Review Summer 1979

National Health Insurance Issues The Cost of a National Prescription Program Gordon Trapnell 1979

National Nursing Home Survey 1977 Series 13 No 43 NCHS

Panel Survey American Hospital Association unpublished data 1966-1978

Patient Charges in Short-Stay Hospitals United States 1968-1970 Series 13 No 15 NCHS

Private Health Insurance Plans in 1977 Coverage Enrollshyment and Financial Experience Marjorie Smith Carroll and Ross Arnett III Health Care Financing Review Fall 1979

Time Cells and Aging Bernard Strehler 1977

Time trend data for Medicare hospital admissions and surgical rates from unpublished Medicare data HCFA 1976

Two Decades of Health Services Social Survey Trends In Use and Expenditure Anderson et al 1976

Utilization of Short-Stay HospitalsmdashAnnual Summary for the United States 1977 Series 13 No 41 NCHS

Utilization of Short-Stay HospitalsmdashUnited States 1967 Series 13 No 9 NCHS

9 0 HEALTH CARE FINANCING REVIEW SPRING 1980

TABLE C

Estimated Personal Health Care Expenditures for Health Services and Supplies under Public Programs by Program for Three Age Groups for Calendar Years 19781977197619701965

(in millions)

1978 1977 1976Type of Program Under 65 and Under 65 and Under 65 and

Total 19 19-64 Over Total 19 19-64 Over Total 19 19-64 Over

All public programs $65042 $5696 $28172 $31175 $58091 $5206 $25196 $27690 $51596 $4801 $22494 $24302 Federal 46503 3757 15968 26780 41096 3413 13994 23689 36283 3194 12493 20595 State and Local 18539 1939 12204 4395 16996 1793 11203 4001 15314 1607 10001 3707

Major Program Areas Medicare 24919 30 3114 21775 21768 25 2602 19141 18417 17 2087 16313

(Federal)

Medicaid 18365 3142 8612 6611 16657 2849 7812 5996 14849 2534 6673 5642 Federal 10234 1751 4799 3684 9384 1605 4401 3378 8391 1432 3771 3188 State and Local 8131 1391 3813 2927 7273 1244 3411 2618 6458 1102 2902 2454

Other Medical Public Assistance Federal mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash State and Local 1157 100 665 391 1098 93 626 380 1048 83 594 371

Veterans Administration 4943 mdash 3890 1053 4360 mdash 3431 929 4111 mdash 3235 876

(Federal)

Department of Defense 3625 823 2671 131 2336 788 2437 112 3230 811 2327 92 (Federal)

Workers Compensation 3061 mdash 2968 93 2663 mdash 2583 80 2325 mdash 2255 70 (Medical Benefits) mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash mdash Federal Employees 117 mdash 113 4 79 mdash 77 2 69 mdash 67 2 State and Local Programs 2944 mdash 2855 89 2584 mdash 2506 78 2256 mdash 2188 68

State and Local Hospitals 5488 85 4461 942 5170 88 4212 870 4749 83 3898 768 (Net)

Other Public Expenditures for Personal Health Care 3484 1515 1787 182 3039 1363 1493 183 2867 1273 1425 168

Federal 2665 1151 1378 136 2169 995 1043 131 2065 935 1008 122 State and Local 819 364 409 46 870 368 450 52 802 338 417 46

HEALTH CARE FINANCING REVIEW SPRING 1980 87

TABLE C (CONTINUED)

Estimated Personal Health Care Expenditures for Health Services and Supplies under Public Programs by Program for Three Age Groups for Calendar Years 19781977197619701965

(in millions)

Type of Programs 1970 1965 Under 65 and Under 65 and

Total _ _ 1 9 _ _ 19-64__ Over Total _ _ 19_ 19-64 Over

All public programs $22442 $2502 $9341 $10600 $7880 $992 $4231 $2657 Federal 14561 1484 4215 8864 3787 603 1817 1367 State and Local 7881 1018 5126 1736 4093 389 2414 1290

Major Program Areas Medicare 7099 mdash mdash 7099 mdash mdash - mdash

(Federal)

Medicaid 5105 913 2298 1894 mdash mdash mdash mdash Federal 2795 500 1258 1037 mdash mdash mdash mdash State and Local 2310 413 1040 857 mdash mdash mdash mdash

Other Medical Public Assistance 849 82 231 536 2113 217 275 1621 Federal 243 mdash mdash 243 1359 140 177 1043 State and Local 606 82 231 293 753 77 98 578

Veterans Administration 1745 mdash 1374 372 1133 mdash 892 241 (Federal)

Department of Defense 1875 656 1162 56 1012 354 627 30 (Federal)

Workers Compensation (Medical Benefits) 1044 mdash 1010 34 604 mdash 585 19 Federal Employees 23 mdash 22 1 12 mdash 12 mdash

State and Local Programs 1021 mdash 988 33 592 mdash 573 19

State and Local Hospitals 3341 316 2550 476 2378 185 1545 648 (Net)

Other Public Expenditures for Personal Health Care 1383 534 716 133 640 237 308 97

Federal 781 327 399 56 269 109 109 52 State and Local 602 207 317 77 372 128 199 44

HEALTH CARE FINANCING REVIEWSPRING 1980 88

TABLE D

Estimated Amount and Percentage Distribution of Personal Health Care Expenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 19781977197619701965

Amount (in millions) Percentage Distribution Public Public

Medishy Medishy Medishy Medi-Total Private Total care caid Other Total Private Total care caid Other

1978

Total $49366 $18192 $31175 $21775 $6611 $2789 1000 368 632 441 134 57

Hospital CarePhysicians Services

21169 8910

2645 3620

18524 5290

15799 4954

754 260

1971 76

1000 1000

125 406

875 594

746 556

36 29

93 9

DentistsServices 1383 1338 45 mdash 34 11 1000 968 32 mdash 24 8 Other Professional Services 1090 631 459 381 72 6 1000 579 421 350 66 6 Drugs and Drug Sundries 3231 2728 503 mdash 468 35 1000 844 156 mdash 145 11 Eyeglasses and AppliancesNursing-Home CareOther Health Services

605 12624

354

405 6790 35

201 5834 319

189 380 72

mdash 4969 54

12 485 193

1000 1000 1000

669 538 99

332 462 901

312 30 203

_ 394 153

20 38 545

1977

Total $43303 $15613 $27690 $19141 $5999 $2552 1000 361 639 442 139 59

Hospital Care 18897 2259 16638 14119 737 1782 1000 120 880 747 39 94 Physicians ServicesDentistsServices

7623 1188

3186 1142

4437 46

4132 mdash

236 33

69 13

1000 1000

418 961

582 39

542 mdash

31 28

9 11

Other Professional Services 940 555 385 316 62 7 1000 590 410 336 66 7 Drugs and Drug SundriesEyeglasses and AppliancesNursing-Home CareOther Health Services

2941 535

10847 332

2475 374 5587 33

466 161 5260 299

mdash 152 364 58

432 mdash 4439 60

34 9 457 181

1000 1000 1000 1000

842 699 515 100

158 301 485 901

mdash 284 34 175

147 mdash 409 181

11 17 42 545

1976

Total $37674 $13372 $24302 $16313 $5644 $2345 1000 355 645 433 150 62

Hospital Care 16305 1831 14474 12095 756 1623 1000 112 888 742 46 100 PhysiciansServicesDentistsServices

6505 1013

2746 967

3759 46

3474 mdash

221 32

64 14

1000 1000

422 954

578 46

534 mdash

34 32

10 14

Other Professional Services 810 485 325 252 67 6 1000 599 401 311 83 7 Drugs and Drug SundriesEyeglasses and AppliancesNursing-Home CareOther Health Services

2716 490

9395 440

2263 357 4693 30

453 134 4702 410

mdash 125 320 47

419 mdash 3964 185

34 9 418 178

1000 1000 1000 1000

833 728 500 68

167 273 500 932

mdash 255 34 10

154 mdash 422 420

13 18 44 405

1970

Total $17270 $6694 $10577 $7099 $1894 $1584 1000 388 612 411 110 92

Hospital Care 7054 806 6248 4974 405 869 1000 114 886 705 57 123 PhysiciansServicesDentists Services

3030 413

1166 386

1864 27

1718 mdash

115 19

31 9

1000 1000

385 935

615 65

567 mdash

38 46

10 22

Other Professional Services 389 285 104 79 22 3 1000 733 267 203 57 8 Drugs and Drug Sundries 1732 1524 208 mdash 190 18 1000 880 120 shy 110 10 Eyeglasses and Appliances 304 255 49 45 mdash 4 1000 839 161 148 mdash 13 Nursing-Home CareOther Health Services

4144 204

2255 18

1889 186

265 17

1112 31

512 138

1000 1000

544 88

456 912

64 83

268 152

124 677

1965

Total $8869 $6213 $2656 mdash shy $2656 1000 700 300 shy shy 300

Hospital Care 3296 1677 1619 mdash shy 1619 1000 509 491 shy shy 491 PhysiciansServicesDentistsServices

1737 213

1617 201

120 12

mdash mdash

shymdash 120

12 1000 1000

931 944

69 56

mdash mdash

mdash mdash

69 56

Other Professional Services 244 236 8 mdash mdash 8 1000 967 33 mdash mdash 33 Drugs and Drug SundriesEyeglasses and AppliancesNursing-Home CareOther Health Services

1148 256

1825 150

1030 254 1187 13

118 2 638 137

mdash mdash mdash mdash

mdash mdash shy

shy

118 2

638 137

1000 1000 1000 1000

897 992 650 87

103 8 350 913

mdash mdash shy

shy

mdash mdash

shyshy

103 8

350 913

HEALTH CARE FINANCING REVIEW SPRING 1980 89

References

Characteristics of Aged Institutionalized Enrollees 1973-Current Medicare Survey Ronald Deacon October 31 1977

Cost of Living Council Health Care Final Phase IV Regulashytions Vol 39 No 16 1974

Current Estimates from the Health Interview Survey 1978 Series 10 No 130 NCHS

Health Characteristics of Persons with Chronic Activity Limitations United Statesmdash1974 Series 10 No 112 NCHS

Medicare Summary Utilization and Reimbursement by Pershyson 1967 1968 1969 1976 HCFA

The National Ambulatory Medical Care Survey 1975 Sumshymary Series 13 No 33 NCHS

National Health Expenditures 1978 Robert Gibson Health Care Financing Review Summer 1979

National Health Insurance Issues The Cost of a National Prescription Program Gordon Trapnell 1979

National Nursing Home Survey 1977 Series 13 No 43 NCHS

Panel Survey American Hospital Association unpublished data 1966-1978

Patient Charges in Short-Stay Hospitals United States 1968-1970 Series 13 No 15 NCHS

Private Health Insurance Plans in 1977 Coverage Enrollshyment and Financial Experience Marjorie Smith Carroll and Ross Arnett III Health Care Financing Review Fall 1979

Time Cells and Aging Bernard Strehler 1977

Time trend data for Medicare hospital admissions and surgical rates from unpublished Medicare data HCFA 1976

Two Decades of Health Services Social Survey Trends In Use and Expenditure Anderson et al 1976

Utilization of Short-Stay HospitalsmdashAnnual Summary for the United States 1977 Series 13 No 41 NCHS

Utilization of Short-Stay HospitalsmdashUnited States 1967 Series 13 No 9 NCHS

9 0 HEALTH CARE FINANCING REVIEW SPRING 1980

TABLE C (CONTINUED)

Estimated Personal Health Care Expenditures for Health Services and Supplies under Public Programs by Program for Three Age Groups for Calendar Years 19781977197619701965

(in millions)

Type of Programs 1970 1965 Under 65 and Under 65 and

Total _ _ 1 9 _ _ 19-64__ Over Total _ _ 19_ 19-64 Over

All public programs $22442 $2502 $9341 $10600 $7880 $992 $4231 $2657 Federal 14561 1484 4215 8864 3787 603 1817 1367 State and Local 7881 1018 5126 1736 4093 389 2414 1290

Major Program Areas Medicare 7099 mdash mdash 7099 mdash mdash - mdash

(Federal)

Medicaid 5105 913 2298 1894 mdash mdash mdash mdash Federal 2795 500 1258 1037 mdash mdash mdash mdash State and Local 2310 413 1040 857 mdash mdash mdash mdash

Other Medical Public Assistance 849 82 231 536 2113 217 275 1621 Federal 243 mdash mdash 243 1359 140 177 1043 State and Local 606 82 231 293 753 77 98 578

Veterans Administration 1745 mdash 1374 372 1133 mdash 892 241 (Federal)

Department of Defense 1875 656 1162 56 1012 354 627 30 (Federal)

Workers Compensation (Medical Benefits) 1044 mdash 1010 34 604 mdash 585 19 Federal Employees 23 mdash 22 1 12 mdash 12 mdash

State and Local Programs 1021 mdash 988 33 592 mdash 573 19

State and Local Hospitals 3341 316 2550 476 2378 185 1545 648 (Net)

Other Public Expenditures for Personal Health Care 1383 534 716 133 640 237 308 97

Federal 781 327 399 56 269 109 109 52 State and Local 602 207 317 77 372 128 199 44

HEALTH CARE FINANCING REVIEWSPRING 1980 88

TABLE D

Estimated Amount and Percentage Distribution of Personal Health Care Expenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 19781977197619701965

Amount (in millions) Percentage Distribution Public Public

Medishy Medishy Medishy Medi-Total Private Total care caid Other Total Private Total care caid Other

1978

Total $49366 $18192 $31175 $21775 $6611 $2789 1000 368 632 441 134 57

Hospital CarePhysicians Services

21169 8910

2645 3620

18524 5290

15799 4954

754 260

1971 76

1000 1000

125 406

875 594

746 556

36 29

93 9

DentistsServices 1383 1338 45 mdash 34 11 1000 968 32 mdash 24 8 Other Professional Services 1090 631 459 381 72 6 1000 579 421 350 66 6 Drugs and Drug Sundries 3231 2728 503 mdash 468 35 1000 844 156 mdash 145 11 Eyeglasses and AppliancesNursing-Home CareOther Health Services

605 12624

354

405 6790 35

201 5834 319

189 380 72

mdash 4969 54

12 485 193

1000 1000 1000

669 538 99

332 462 901

312 30 203

_ 394 153

20 38 545

1977

Total $43303 $15613 $27690 $19141 $5999 $2552 1000 361 639 442 139 59

Hospital Care 18897 2259 16638 14119 737 1782 1000 120 880 747 39 94 Physicians ServicesDentistsServices

7623 1188

3186 1142

4437 46

4132 mdash

236 33

69 13

1000 1000

418 961

582 39

542 mdash

31 28

9 11

Other Professional Services 940 555 385 316 62 7 1000 590 410 336 66 7 Drugs and Drug SundriesEyeglasses and AppliancesNursing-Home CareOther Health Services

2941 535

10847 332

2475 374 5587 33

466 161 5260 299

mdash 152 364 58

432 mdash 4439 60

34 9 457 181

1000 1000 1000 1000

842 699 515 100

158 301 485 901

mdash 284 34 175

147 mdash 409 181

11 17 42 545

1976

Total $37674 $13372 $24302 $16313 $5644 $2345 1000 355 645 433 150 62

Hospital Care 16305 1831 14474 12095 756 1623 1000 112 888 742 46 100 PhysiciansServicesDentistsServices

6505 1013

2746 967

3759 46

3474 mdash

221 32

64 14

1000 1000

422 954

578 46

534 mdash

34 32

10 14

Other Professional Services 810 485 325 252 67 6 1000 599 401 311 83 7 Drugs and Drug SundriesEyeglasses and AppliancesNursing-Home CareOther Health Services

2716 490

9395 440

2263 357 4693 30

453 134 4702 410

mdash 125 320 47

419 mdash 3964 185

34 9 418 178

1000 1000 1000 1000

833 728 500 68

167 273 500 932

mdash 255 34 10

154 mdash 422 420

13 18 44 405

1970

Total $17270 $6694 $10577 $7099 $1894 $1584 1000 388 612 411 110 92

Hospital Care 7054 806 6248 4974 405 869 1000 114 886 705 57 123 PhysiciansServicesDentists Services

3030 413

1166 386

1864 27

1718 mdash

115 19

31 9

1000 1000

385 935

615 65

567 mdash

38 46

10 22

Other Professional Services 389 285 104 79 22 3 1000 733 267 203 57 8 Drugs and Drug Sundries 1732 1524 208 mdash 190 18 1000 880 120 shy 110 10 Eyeglasses and Appliances 304 255 49 45 mdash 4 1000 839 161 148 mdash 13 Nursing-Home CareOther Health Services

4144 204

2255 18

1889 186

265 17

1112 31

512 138

1000 1000

544 88

456 912

64 83

268 152

124 677

1965

Total $8869 $6213 $2656 mdash shy $2656 1000 700 300 shy shy 300

Hospital Care 3296 1677 1619 mdash shy 1619 1000 509 491 shy shy 491 PhysiciansServicesDentistsServices

1737 213

1617 201

120 12

mdash mdash

shymdash 120

12 1000 1000

931 944

69 56

mdash mdash

mdash mdash

69 56

Other Professional Services 244 236 8 mdash mdash 8 1000 967 33 mdash mdash 33 Drugs and Drug SundriesEyeglasses and AppliancesNursing-Home CareOther Health Services

1148 256

1825 150

1030 254 1187 13

118 2 638 137

mdash mdash mdash mdash

mdash mdash shy

shy

118 2

638 137

1000 1000 1000 1000

897 992 650 87

103 8 350 913

mdash mdash shy

shy

mdash mdash

shyshy

103 8

350 913

HEALTH CARE FINANCING REVIEW SPRING 1980 89

References

Characteristics of Aged Institutionalized Enrollees 1973-Current Medicare Survey Ronald Deacon October 31 1977

Cost of Living Council Health Care Final Phase IV Regulashytions Vol 39 No 16 1974

Current Estimates from the Health Interview Survey 1978 Series 10 No 130 NCHS

Health Characteristics of Persons with Chronic Activity Limitations United Statesmdash1974 Series 10 No 112 NCHS

Medicare Summary Utilization and Reimbursement by Pershyson 1967 1968 1969 1976 HCFA

The National Ambulatory Medical Care Survey 1975 Sumshymary Series 13 No 33 NCHS

National Health Expenditures 1978 Robert Gibson Health Care Financing Review Summer 1979

National Health Insurance Issues The Cost of a National Prescription Program Gordon Trapnell 1979

National Nursing Home Survey 1977 Series 13 No 43 NCHS

Panel Survey American Hospital Association unpublished data 1966-1978

Patient Charges in Short-Stay Hospitals United States 1968-1970 Series 13 No 15 NCHS

Private Health Insurance Plans in 1977 Coverage Enrollshyment and Financial Experience Marjorie Smith Carroll and Ross Arnett III Health Care Financing Review Fall 1979

Time Cells and Aging Bernard Strehler 1977

Time trend data for Medicare hospital admissions and surgical rates from unpublished Medicare data HCFA 1976

Two Decades of Health Services Social Survey Trends In Use and Expenditure Anderson et al 1976

Utilization of Short-Stay HospitalsmdashAnnual Summary for the United States 1977 Series 13 No 41 NCHS

Utilization of Short-Stay HospitalsmdashUnited States 1967 Series 13 No 9 NCHS

9 0 HEALTH CARE FINANCING REVIEW SPRING 1980

TABLE D

Estimated Amount and Percentage Distribution of Personal Health Care Expenditures for Persons Aged 65 and Over by Type of Expenditure and Source of Funds for Calendar Years 19781977197619701965

Amount (in millions) Percentage Distribution Public Public

Medishy Medishy Medishy Medi-Total Private Total care caid Other Total Private Total care caid Other

1978

Total $49366 $18192 $31175 $21775 $6611 $2789 1000 368 632 441 134 57

Hospital CarePhysicians Services

21169 8910

2645 3620

18524 5290

15799 4954

754 260

1971 76

1000 1000

125 406

875 594

746 556

36 29

93 9

DentistsServices 1383 1338 45 mdash 34 11 1000 968 32 mdash 24 8 Other Professional Services 1090 631 459 381 72 6 1000 579 421 350 66 6 Drugs and Drug Sundries 3231 2728 503 mdash 468 35 1000 844 156 mdash 145 11 Eyeglasses and AppliancesNursing-Home CareOther Health Services

605 12624

354

405 6790 35

201 5834 319

189 380 72

mdash 4969 54

12 485 193

1000 1000 1000

669 538 99

332 462 901

312 30 203

_ 394 153

20 38 545

1977

Total $43303 $15613 $27690 $19141 $5999 $2552 1000 361 639 442 139 59

Hospital Care 18897 2259 16638 14119 737 1782 1000 120 880 747 39 94 Physicians ServicesDentistsServices

7623 1188

3186 1142

4437 46

4132 mdash

236 33

69 13

1000 1000

418 961

582 39

542 mdash

31 28

9 11

Other Professional Services 940 555 385 316 62 7 1000 590 410 336 66 7 Drugs and Drug SundriesEyeglasses and AppliancesNursing-Home CareOther Health Services

2941 535

10847 332

2475 374 5587 33

466 161 5260 299

mdash 152 364 58

432 mdash 4439 60

34 9 457 181

1000 1000 1000 1000

842 699 515 100

158 301 485 901

mdash 284 34 175

147 mdash 409 181

11 17 42 545

1976

Total $37674 $13372 $24302 $16313 $5644 $2345 1000 355 645 433 150 62

Hospital Care 16305 1831 14474 12095 756 1623 1000 112 888 742 46 100 PhysiciansServicesDentistsServices

6505 1013

2746 967

3759 46

3474 mdash

221 32

64 14

1000 1000

422 954

578 46

534 mdash

34 32

10 14

Other Professional Services 810 485 325 252 67 6 1000 599 401 311 83 7 Drugs and Drug SundriesEyeglasses and AppliancesNursing-Home CareOther Health Services

2716 490

9395 440

2263 357 4693 30

453 134 4702 410

mdash 125 320 47

419 mdash 3964 185

34 9 418 178

1000 1000 1000 1000

833 728 500 68

167 273 500 932

mdash 255 34 10

154 mdash 422 420

13 18 44 405

1970

Total $17270 $6694 $10577 $7099 $1894 $1584 1000 388 612 411 110 92

Hospital Care 7054 806 6248 4974 405 869 1000 114 886 705 57 123 PhysiciansServicesDentists Services

3030 413

1166 386

1864 27

1718 mdash

115 19

31 9

1000 1000

385 935

615 65

567 mdash

38 46

10 22

Other Professional Services 389 285 104 79 22 3 1000 733 267 203 57 8 Drugs and Drug Sundries 1732 1524 208 mdash 190 18 1000 880 120 shy 110 10 Eyeglasses and Appliances 304 255 49 45 mdash 4 1000 839 161 148 mdash 13 Nursing-Home CareOther Health Services

4144 204

2255 18

1889 186

265 17

1112 31

512 138

1000 1000

544 88

456 912

64 83

268 152

124 677

1965

Total $8869 $6213 $2656 mdash shy $2656 1000 700 300 shy shy 300

Hospital Care 3296 1677 1619 mdash shy 1619 1000 509 491 shy shy 491 PhysiciansServicesDentistsServices

1737 213

1617 201

120 12

mdash mdash

shymdash 120

12 1000 1000

931 944

69 56

mdash mdash

mdash mdash

69 56

Other Professional Services 244 236 8 mdash mdash 8 1000 967 33 mdash mdash 33 Drugs and Drug SundriesEyeglasses and AppliancesNursing-Home CareOther Health Services

1148 256

1825 150

1030 254 1187 13

118 2 638 137

mdash mdash mdash mdash

mdash mdash shy

shy

118 2

638 137

1000 1000 1000 1000

897 992 650 87

103 8 350 913

mdash mdash shy

shy

mdash mdash

shyshy

103 8

350 913

HEALTH CARE FINANCING REVIEW SPRING 1980 89

References

Characteristics of Aged Institutionalized Enrollees 1973-Current Medicare Survey Ronald Deacon October 31 1977

Cost of Living Council Health Care Final Phase IV Regulashytions Vol 39 No 16 1974

Current Estimates from the Health Interview Survey 1978 Series 10 No 130 NCHS

Health Characteristics of Persons with Chronic Activity Limitations United Statesmdash1974 Series 10 No 112 NCHS

Medicare Summary Utilization and Reimbursement by Pershyson 1967 1968 1969 1976 HCFA

The National Ambulatory Medical Care Survey 1975 Sumshymary Series 13 No 33 NCHS

National Health Expenditures 1978 Robert Gibson Health Care Financing Review Summer 1979

National Health Insurance Issues The Cost of a National Prescription Program Gordon Trapnell 1979

National Nursing Home Survey 1977 Series 13 No 43 NCHS

Panel Survey American Hospital Association unpublished data 1966-1978

Patient Charges in Short-Stay Hospitals United States 1968-1970 Series 13 No 15 NCHS

Private Health Insurance Plans in 1977 Coverage Enrollshyment and Financial Experience Marjorie Smith Carroll and Ross Arnett III Health Care Financing Review Fall 1979

Time Cells and Aging Bernard Strehler 1977

Time trend data for Medicare hospital admissions and surgical rates from unpublished Medicare data HCFA 1976

Two Decades of Health Services Social Survey Trends In Use and Expenditure Anderson et al 1976

Utilization of Short-Stay HospitalsmdashAnnual Summary for the United States 1977 Series 13 No 41 NCHS

Utilization of Short-Stay HospitalsmdashUnited States 1967 Series 13 No 9 NCHS

9 0 HEALTH CARE FINANCING REVIEW SPRING 1980

References

Characteristics of Aged Institutionalized Enrollees 1973-Current Medicare Survey Ronald Deacon October 31 1977

Cost of Living Council Health Care Final Phase IV Regulashytions Vol 39 No 16 1974

Current Estimates from the Health Interview Survey 1978 Series 10 No 130 NCHS

Health Characteristics of Persons with Chronic Activity Limitations United Statesmdash1974 Series 10 No 112 NCHS

Medicare Summary Utilization and Reimbursement by Pershyson 1967 1968 1969 1976 HCFA

The National Ambulatory Medical Care Survey 1975 Sumshymary Series 13 No 33 NCHS

National Health Expenditures 1978 Robert Gibson Health Care Financing Review Summer 1979

National Health Insurance Issues The Cost of a National Prescription Program Gordon Trapnell 1979

National Nursing Home Survey 1977 Series 13 No 43 NCHS

Panel Survey American Hospital Association unpublished data 1966-1978

Patient Charges in Short-Stay Hospitals United States 1968-1970 Series 13 No 15 NCHS

Private Health Insurance Plans in 1977 Coverage Enrollshyment and Financial Experience Marjorie Smith Carroll and Ross Arnett III Health Care Financing Review Fall 1979

Time Cells and Aging Bernard Strehler 1977

Time trend data for Medicare hospital admissions and surgical rates from unpublished Medicare data HCFA 1976

Two Decades of Health Services Social Survey Trends In Use and Expenditure Anderson et al 1976

Utilization of Short-Stay HospitalsmdashAnnual Summary for the United States 1977 Series 13 No 41 NCHS

Utilization of Short-Stay HospitalsmdashUnited States 1967 Series 13 No 9 NCHS

9 0 HEALTH CARE FINANCING REVIEW SPRING 1980