Health spending in the 1980's: integration of clinical practice patterns with management

Abstract

Health care spending in the United States more than tripled between 1972 and 1982, increasing from $94 billion to $322 billion. This growth substantially outpaced overall growth in the economy. National health expenditures are projected to reach approximately $690 billion in 1990 and consume roughly 12 percent of the gross national product. Government spending for health care is projected to reach $294 billion by 1990, with the Federal Government paying 72 percent. The Medicare prospective payment system and increasing competition in the health services sector are providing incentives to integrate clinical practice patterns with improved management practices.

Figure 1. Total national health expenditures with bandwidths: 1965-90¹

¹The conditional bandwidths around the baseline projection scenario provide one indicator of variability. The standard error associated with annual percent increases in total national health expenditures for 1966-82 was multiplied by a t-distribution value of 2.12 to derive the conditional “95 percent” bandwidths. The calculated bandwidths are approximate and are used as a rough guide in assessing variability and uncertainty. It is important to keep in mind the potential dangers of extrapolating historical measures of variability into the future. That is, there can be no assurance that future variability will replicate historical variability. SOURCE: Health Care Financing Administration, Bureau of Data Management and Strategy, Office of Financial and Actuarial Analysis.

Figure 2. National health expenditures as percent of gross national product with bandwidths: 1965-90¹

¹The conditional bandwidths around the baseline projection scenario provide one indicator of variability. The standard error associated with annual percent increases in the ratio of national health expenditures to gross national product for 1966-82 was multiplied by a t-distribution value of 2.12 to derive the conditional “95 percent” bandwidths. The calculated bandwidths are approximate and are used as a rough guide in assessing variability and uncertainty. It is important to keep in mind the potential dangers of extrapolating historical measures of variability into the future. That is, there can be no assurance that future variability will replicate historical variability. SOURCE: Health Care Financing Administration, Bureau of Data Management and Strategy, Office of Financial and Actuarial Analysis.

Figure 3. Factors accounting for growth in total national health expenditures: 1972-82

Figure 4. Government expenditures for health as a percent of total government expenditures: Selected years 1950-82

Figure 5. Medicare outlays with bandwidths: 1968-90^1,2

¹Outlays include benefits plus administrative expenses. ²The conditional bandwidths around the baseline projections scenario provide one indicator of variability. The standard error associated with annual percentage increases in Medicare outlays for 1969-1982 was multiplied by a t-distribution value of 2.16 to derive the conditional “95 percent” bandwidths. The calculated bandwidths are approximate and are used as a rough guide in assessing variability and uncertainty. It is important to keep in mind the potential dangers of extrapolating historical measures of variability into the future. That is, there can be no assurance that future variability will replicate historical variability. SOURCE: Health Care Financing Administration, Bureau of Data Management and Strategy, Office of Financial and Actuarial Analysis.

Figure 6. Federal Medicaid outlays, with bandwidths: 1968-90^1,2

¹Outlays include benefits plus administrative expenses. ²The conditional bandwidths around the baseline projections scenario provide one indicator of variability. The standard error associated with annual percent increases in Federal Medicaid outlays for 1969-1982 was multiplied by a t-distribution value of 2.16 to derive the conditional “95 percent” bandwidths. The calculated bandwidths are approximate and are used as a rough guide in assessing variability and uncertainty. It is important to keep in mind the potential dangers of extrapolating historical measures of variability into the future. That is, there can be no assurance that future variability will replicate historical variability. SOURCE: Health Care Financing Administration, Bureau of Data Management and Strategy, Office of Financial and Actuarial Analysis.

Figure 7. Employer contributions for health insurance as percent of total employee compensation: 1965-82¹

¹Employer contributions for private health insurance premiums and for Federal hospital insurance (Medicare) taxes are included. Also see Table G. SOURCE: Health Care Financing Administration, Bureau of Data Management and Strategy, Office of Financial and Actuarial Analysis.

Figure 8. Factors accounting for growth in expenditures for community hospital inpatient care: 1972-82

Figure 9. Factors accounting for growth in total systems cost: 1972-82

Figure 10. Interaction between nursing home and hospital sectors: Quarterly percent changes in community hospital inpatient days for aged and nursing home employment, 1972-83^1,2

¹Quarter-to-quarter percent changes are graphed, not percent changes from same quarter a year ago. ²Quarterly percent changes in nursing home employment was used as a rough indicator of changes in nursing home use (in the absence of use data). SOURCE: Health Care Financing Administration, Bureau of Data Management and Strategy, Office of Financial and Actuarial Analysis.

Figure 11. Potential substitutions for nursing home care, based on needs for and availability of shelter, social services, and medical care

Figure 12. Factors accounting for growth in expenditures for physicians' services: 1972-82

Figure 13. Factors accounting for growth in expenditures for dentists' services: 1972-82

Figure 14. Drug industry trends for productivity and inflation-adjusted prices (consumer and producer): 1965-82

Figure 15. Expenditures for medical research as percent of national health expenditures: 1965-82¹

¹Medical research expenditures of drug companies and manufacturers of medical supplies and equipment are excluded from the Health Care Financing Administration category of “medical research” but are included in the expenditure category in which the product falls. SOURCE: Health Care Financing Administration, Bureau of Data Management and Strategy, Office of Financial and Actuarial Analysis.