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Medicare Spending to Surge; Chronic Diseases Increase; Hospitals Express Fear
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Wall St Jnl
By JANE ZHANG
February 26, 2008; Page A3
WASHINGTON -- Government spending on health care could nearly double by 2017 to more than $2 trillion, according to a new federal study, reflecting a surge that promises to complicate the campaign debate about health care.
Driven by the aging of the baby-boom generation and rising costs of new drugs and medical technology, Medicare, the big federal health program for the elderly, will take up 20.7% of national health spending by 2017, according to the report.
Overall, the report projects health-care spending in the U.S. will hit $4.3 trillion by 2017, nearly double the 2007 amount. That would equate to nearly 20% of gross domestic product. In 2007, health-care spending accounted for 16.3% of GDP, according to the study. But more of that cost is expected to shift to government agencies -- even as the federal government struggles to shrink huge deficits.
The Bush administration has proposed various steps to curb Medicare spending in its latest budget, but it isn't clear whether those cuts will win approval from Congress.
"The impact of the population aging is expected ... to have a substantial influence on the public share of spending growth, as the leading edge of the baby-boom generation becomes eligible for Medicare," wrote Sean Keehan and his co-authors of the study, economists at the federal agency that runs Medicare and Medicaid. The study expects aging baby boomers to account for a relatively small share of future health-care spending growth on a per enrollee basis.
The annual projections by the Centers for Medicare and Medicaid Services are being published today in the journal Health Affairs.
Health care has become a key topic in the presidential campaign and a top voter concern. Sen. John McCain, the Republican front-runner, favors using tax changes to make health care more accessible.
· What's New: Government spending on health care is expected to nearly double by 2017 to more than $2 trillion.
· The Reasons: Two main factors are driving up costs: the aging population -- especially baby boomers -- and the rising price of new drugs and medical technology.
· What's at Stake: The latest data renews the spotlight on the question of how the government should pay for the bulging cost of health care.
The two Democratic candidates, Sen. Barack Obama and Sen. Hillary Clinton, would spend some $100 billion a year to provide universal health care. But the two have sparred over how to expand government coverage and whether all Americans should be required to buy health insurance.
Concerns about the bulging health-care budget aren't new, and the Congressional Budget Office recently warned about the federal budget gap as baby boomers retire and start tapping Medicare, Medicaid and Social Security.
Health-care spending will grow on average 6.7% in the next decade, outpacing the general economy by 1.9 percentage points each year, the new federal study said. The growth will mainly be driven by medical prices and increased usage as well as smaller factors such as population growth and its changing mix. Private spending on health care is expected to grow at a slower pace, from 6.6% in 2009 to 5.9% in 2017, the authors said. That is partly because of the cost shift to the government.
Medicare spending is expected to grow to $844 billion in 2017, up from $427 billion in 2007. There also will be a shift toward the private arm of Medicare, which tends to cost the government more. By 2017, 27.5% of eligible Medicare enrollees are expected to enroll in managed-care plans, compared with 16.4% in 2006, the study said.
From other media sources:
'Core Problem'
''Nothing we are doing in the policy debate is attacking the core problem, which is managing chronic diseases,'' said Kenneth Thorpe, a health policy professor at Emory University in Atlanta, in a telephone interview.
Chronic diseases such as diabetes and high blood pressure, and health problems like obesity, account for about 75 percent of America's health spending, he said.
This trend means that "policymakers, insurers, and the public collectively face some difficult decisions about the way health care is delivered and paid for," said Sean Keehan, an economist with CMS and one of the report's authors.
Kerry Weems, CMS' acting administrator, said the projection "reminds us that we need to accelerate our efforts to improve our health care delivery system to make sure that Medicare and Medicaid are sustainable for future generations of beneficiaries and taxpayers."
On an annual basis, the growth in Medicare spending is expected to increase from about 6.5 percent last year to about 8 percent by 2017 because of the increased number of baby boomers receiving benefits.
In his budget for next year, President Bush recommended slowing the yearly growth of Medicare from about 7 percent to about 5 percent. The slowdown would occur primarily by freezing reimbursement rates for the next three years to scores of health care providers, such as hospitals, nursing homes and home health centers.
Bush also proposed requiring wealthier Medicare beneficiaries to pay higher monthly premiums when participating in Medicare's prescription drug coverage plan.
Those recommendations would reduce spending by nearly $178 billion over five years, but have little chance of passage in Congress.
Health and Human Services Secretary Michael O. Leavitt has acknowledged the unpopularity of the recommendations, but he said politicians must make some hard decisions. The longer lawmakers wait, the more difficult the decisions will be.
"Medicare, on its current course, is not sustainable," Leavitt has testified.
Government economists say it's hardly a new trend that the health care sector will grow more quickly than the overall economy. Over the past 30 years, health spending has exceeded growth in the gross domestic product by about 2.7 percentage points each year. Over the coming decade, that difference is expected to narrow slightly.
Still, the continued gap is worrisome, Weems said. He added that consumers, particularly businesses, need more information about the quality and cost of care.
The Clinton and Obama campaigns maintain that they've figured out how to pay for their proposals without worsening the deficit. The problem is that given the difficulties we already face-that $4.3 trillion-their mechanisms to finance these programs just aren't very convincing. In addition to discontinuing tax cuts for wealthy Americans and reducing our presence in Iraq, they rely extensively on savings from quality and efficiency improvements within the healthcare system itself. That's like saying you're going to pay for a weight-loss program with the money you'll save on groceries once you're slim. Beefing up prevention and adopting electronic health records do indeed hold out great promise for long-term healthcare savings. But how are we going to pay for them in the here and now?
More than $13,000 per person to be spent on health care in U.S. by 2017: study
1 day ago
WASHINGTON - In less than a decade, one out of every five dollars spent by Americans and their government will be for health care.
That's the projection contained in a new U.S. government report, which says total health-care spending in the year 2017 will average out to $13,101 per person.
By contrast, that spending in 2006 worked out to an average of $7,026 per person, for a total of 2.1 trillion dollars. That expenditure is expected to double to more than 4 trillion annually by 2017.
That represents an annual increase of 6.7 per cent - nearly three times the rate of inflation.
The Centers for Medicare and Medicaid Services says the increase will be driven by higher prices and an increased demand for care.
As the population ages, the government will pick up a bigger share of the tab.
Cost-Cutting Legislation
The predictions come one day after the Bush administration unveiled a new bill designed to cut Medicare spending. The bill was mandated by a law requiring new legislation as soon as certain spending thresholds are met, and such major legislation is unlikely to be passed this year, lawmakers say.
The bill was introduced in both houses of Congress. But some Democrats said they had no intention of advocating for cuts proposed by the White House.
"I am required by law to introduce the White House's legislation on Medicare today, but I'm compelled by my commitment to America's seniors to insist on better solutions," Sen. Max Baucus (D-Mont.), chairman of the Finance Committee, said in a statement.
Many Republicans have called for curbs in Medicare spending, including cuts to hospitals and other health providers. "Medicare is not sustainable on its current path. Soaring costs and a growing number of beneficiaries threaten to overwhelm the program," Rep. Jim McCrery (R-La.), the senior Republican on the House Ways and Means Committee, said in a statement.
The projections also come as Democratic candidates Sen. Hillary Clinton (D-N.Y.) and Barack Obama (D-Ill.) continue to debate their health plans. Both candidates vow to improve access to insurance and to cut health costs.
Those plans would have to be passed by Congress before they could be put into effect. But Tuesday's report suggested that they might do little to curb overall spending, at least in Medicare. That plan is expected to continue growing at 6.7% per year as the "leading edge" of the baby-boom generation becomes eligible for government-sponsored health care, the report concludes.
Hospitals in Florida fear impact of Medicare cutbacks
BY EUN KYUNG KIM
FLORIDA TODAY
WASHINGTON - Health First hospitals in Brevard County could lose more than $50 million over the next five years under President Bush's proposal to curb Medicare spending.
Nursing levels, already declining nationally, could suffer further from such a loss, and so could facility and equipment improvements, said Michael Means, president and chief executive officer of Health First, which operates hospitals in Cocoa Beach, Melbourne and Palm Bay.
Officials at other local hospitals also were concerned about how the proposed cuts would affect the hospitals and patient services.
About a third of all Health First patients are on Medicare.
"Truly, those kinds of numbers would be felt all across the board," Means said. "This could be very devastating for us."
Wuesthoff Health System estimates its Rockledge hospital would lose about $27 million in the next five years under the White House proposal. Its Melbourne hospital would lose about $8 million.
Staffing probably would be reduced, along with the ability to update technology, said the company's chief financial officer, George Fayer.
"We just expanded and added the fifth-floor ICU," he said, referring to a new intensive care unit. "We would have to rethink expanded new services" like that.
About half of Wuesthoff patients are on Medicare.
Parrish Medical Center in Titusville did not estimate its loss under the proposal, said Tim Skeldon, its chief financial officer.
Under its proposed budget for next year, the White House has recommended slowing Medicare spending by $183 billion over a five-year period.
By law, the president must propose legislation to limit Medicare spending because of recent forecasts by Medicare trustees. The group has predicted that, by 2013, more than 45 percent of Medicare spending will come from general tax revenue, instead of payroll taxes and premiums paid by beneficiaries.
Bush's budget for next year would allow Medicare to continue growing -- but at a reduced rate. It would increase by 5 percent, instead of the current 7.2 percent.
Jeff Nelligan, a spokesman for the Centers for Medicare and Medicaid Services, said Medicare spending has nearly doubled within the past seven years. The program's budget grew from $219.3 billion in 2000 to nearly $428 billion last year.
"Continuing cost increases have placed tremendous pressures on the program and the overall federal budget," Nelligan said. "The fact is, the program is unsustainable in its current form, and threatens benefits and access for present and future beneficiaries."
A report released Tuesday by the Centers for Medicare and Medicaid predicted that health care spending could double over the next decade, as more aging baby boomers enroll in Medicare.
But hospital officials in Florida said the proposed Medicare cuts would hurt facilities already working with small operating margins, as well as the patients they serve.
Medicare currently pays for more than 90 percent of hospital costs in Florida. Under the president's plan, hospitals throughout the state would lose more than $5.1 billion over the next five years, according to the Florida Hospital Association.
About one out of four people under the age of 65 lacks health insurance, said Rich Rasmussen, a spokesman for the group.
"Additional reimbursement cuts from the federal government are continuing to shift burdens to the insured, and to our state's businesses that provide health care coverage to their employees," he said.
U.S. Sen. Bill Nelson expressed doubt that Congress will allow the measure to pass.
"The cuts are so Draconian that the Congress has to come along and restore the cuts," the Florida Democrat said.
But Republicans said the bigger issue is getting Washington to curb Medicare's growth.
"If allowed to continue on its current course of spending, entitlements -- including Medicare and Medicaid -- will bankrupt this nation," said U.S. Rep. Dave Weldon, an Indialantic Republican.
U.S. Rep. Tom Feeney, an Oviedo Republican, whose district includes north Brevard, stressed that the president's proposal is a response to the warning by Medicare trustees.
"The alarm shouldn't be taken lightly, as the Medicare Part A trust fund is expected to be flat broke in 11 years," said his press secretary, Pepper Pennington.
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