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1993.01.29 :  Study -- Health Expenditures

Contact:  Anne Verano (202) 690-6145
January 29, 1993

       If current laws and practices were to continue, health
expenditures in the United States could reach $1.7 trillion by
the year 2000, according to projections by the Health Care
Financing Administration. 
       Without changes, the HCFA study shows, national health
expenditures could increase from 13.2 percent of the gross
domestic product in 1991 to 18.1 percent in the year 2000, with
per-capita spending of more than $6,000 for every American. 
Gross domestic product is the total value of goods and services
produced in the United States.
       The projections also show that in theory, as baby boomers
reach their 70s and 80s in the first third of the next century,
U.S. health care spending could climb to 32 percent of GDP by
2030, with total expenditures of $16 trillion by 2030, including
inflation.  At this level, health spending per person would be
almost $48,000 for every man, woman and child.
       "These estimates show us the course we are on today, and
our urgent need to change that course," said HHS Secretary Donna
E. Shalala in releasing the projections.  "The nation cannot
sustain spending growth at this rate.  We need a health system
that delivers quality care for all our people, at a reasonable
cost.  The Clinton Administration is committed to doing the hard
work that will be needed to achieve those goals."
       The study, "National health expenditures projections
through 2030," will be published in the Health Care Financing
Review, a quarterly journal issued by HCFA.
       National health spending includes hospital care, physician
and dental services, purchase of prescription and over-the-
counter drugs in retail outlets, nursing home treatment,
government public health activities, research and construction.
       According to HCFA's latest released statistics, health
expenditures grew to about $750 billion in 1991, up 11.4 percent
from 1990 levels.  Health spending, as a share of GDP, rose to
13.2 percent in 1991 from 12.2 percent in 1990.
       HCFA's study projects an average annual growth rate of
10.1 percent in health expenditures through the end of this
century and an overall 8.3 percent rate from 1990 through 2030. 
Health spending expanded at a 10.3 percent annual rate during
1980-90.
       Projected health spending will place increased burdens on
federal and state budgets.  In 1990, total federal spending for
health accounted for 15.4 percent of the U.S. government's
budget, principally funding for Medicare, Medicaid, and health
care for the military and veterans.  By 2000, this share could
nearly double to 28.8 percent, according to the HCFA projections.
       Federal spending as a percent of national health
expenditures is likely to grow more slowly.  The study forecasts
an increase from 29.3 percent in 1990 to 35.5 percent in 2000 or,
in actual federal dollars, from $195.4 billion to $617.5 billion. 
       Medicare's share of health expenditures is expected to
rise from 16.7 percent in 1990 to 18.8 percent by 2000 and to
25.9 percent by 2030. 
       In line with Medicaid's recent rapid growth, its portion
of health expenditures are projected to rise from 11.3 percent in
1990 to a high of nearly 21 percent in 2000.
       "The aging of the population will result in more reliance
on government programs, specifically Medicare and Medicaid, in
the future," the study says.
       An increasingly older population is expected to lead to
higher health expenditures.  An earlier HCFA study showed people
aged 65 and older spend four times as much per capita on health
care as do people under 65. 
       A decline is anticipated in population growth, resulting
in a dramatic change in the population's composition, the study
says.  Currently, 12.4 percent of the population is 65 or older,
and 5.3 percent are 75 or older.  By 2030, people 65 and older
will comprise 20.1 percent of the population, with those at age
75 or more accounting for 9 percent.

    The demographic changes will substantially affect the use of
some types of services.  During the period from 1990 to 2030, the
increasingly aged population, for example, will double spending
for nursing home care, the study says.  Hospital care will be
similarly affected, though not to the same degree.  But the
overall spending for physician services is not expected to be
changed very much by the projected population change.

                               # # #

EDITOR'S NOTE:  HCFA, an agency of the U.S. Department of Health
and Human Services, directs the Medicare and Medicaid programs,
which help pay the medical bills of more than 67 million
Americans.  HCFA's estimated fiscal year 1993 expenditures are
$230 billion, the 12th largest governmental budget of any kind in
the world.