[Budget of the U.S. Government]
[VI. Investing in the Common Good: The Major Functions of the Federal Government]
[22. Health]
[From the U.S. Government Publishing Office, www.gpo.gov]
[[Page 181]]
22. HEALTH
----------------------------------------------------------------------
Table 22-1. FEDERAL RESOURCES IN SUPPORT OF HEALTH
(In millions of dollars)
----------------------------------------------------------------------------------------------------------------
Estimate
Function 550 1996 -----------------------------------------------------------------
Actual 1997 1998 1999 2000 2001 2002
----------------------------------------------------------------------------------------------------------------
Spending:
Discretionary Budget Authority... 23,303 25,045 25,070 25,123 25,139 25,154 25,170
Mandatory Outlays:
Existing law................... 96,806 103,541 109,601 116,321 124,764 134,621 145,107
Proposed legislation........... ......... 39 3,940 3,669 2,059 -175 -4,998
Credit Activity:
Direct loan disbursements........ 25 20 ......... ......... ......... ......... .........
Guaranteed loans................. 210 274 105 6 ......... ......... .........
Tax Expenditures:
Existing law..................... 72,745 79,245 85,095 91,185 97,255 103,675 110,445
Proposed legislation............. ......... 8 19 12 3 3 1
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------
The Federal Government helps meet America's health care needs by
directly providing health care services, by promoting disease prevention
and consumer and occupational safety, by conducting and supporting
research, and by training and helping to train the Nation's health care
work force. All together, the Federal Government will spend about $138
billion in 1998, and allocate $85 billion in tax incentives.
President Johnson and Congress created Medicaid in 1965 to provide
health insurance for the low-income elderly and the poor. Since then,
the Nation's leaders have expanded the program from time to time to meet
emerging needs. In 1986, for instance, they answered public concerns
about high infant mortality rates and the decline in private insurance
coverage by expanding Medicaid coverage for prenatal and child health
services.
In addition, the Federal Government helps to expand health care
coverage to those with which it has a special obligation (including
veterans, uniformed military personnel, and American Indians and Alaska
Natives), and conducts and sponsors vital biomedical research that would
not otherwise take place. Together, all of these Federal activities have
helped to extend life expectancy, cut the infant mortality rate to
historic lows, level the death rate among those with HIV/AIDS, and make
other progress.
Health Care Services
Of the estimated $138 billion in Federal health care outlays in 1998
\1\, 89 percent finances or supports direct heath care services to
individuals.
---------------------------------------------------------------------------
\1\ Excluding Medicare and the military and veterans medical programs.
---------------------------------------------------------------------------
Medicaid: This Federal-State health care program served about 37
million low-income Americans in 1996--with the Federal Government
spending $92 billion (57 percent of the total), while States spent $70
billion (43 percent). States that participate in Medicaid must cover
several categories of eligible people, including certain low-income
elderly, people with disabilities, low-income women and children, and
several mandated services, including hospital care, nursing home care,
and physician services. States also may cover optional populations and
services. Under current law, Federal experts expect total Medicaid
spending to
[[Page 182]]
grow an average of 7.2 percent a year from 1997 to 2002.
Medicaid covers a fourth of the Nation's children and is the largest
single purchaser of maternity care as well as of nursing home services
and other long-term care services; the program covers almost two-thirds
of nursing home residents. The elderly and disabled made up only 30
percent of Medicaid beneficiaries in 1995, but accounted for 61 percent
of spending on benefits. Adults and children made up 70 percent of
recipients, but accounted for only 25 percent of spending on benefits.
Medicaid serves at least half of all adults living with AIDS (and up to
90 percent of children with AIDS), and is the largest single payor of
direct medical services to adults living with AIDS.
States increasingly rely on managed care arrangements to provide
health care through Medicaid, with enrollment in such arrangements
rising from 7.8 million in 1994 to 11.6 million (about a third of all
recipients) in 1995.
Other Health Care Services: The Department of Health and Human
Services (HHS) supplements Medicare (discussed in Chapter 23) and
Medicaid with a number of ``gap-filling'' grant activities to support
health services for low-income or specific populations, including
Consolidated Health Center grants; Ryan White AIDS treatment grants; the
Maternal and Child Health block grant; Family Planning; and the
Substance Abuse block grant. In addition, the Indian Health Service
(IHS) provides direct care to 1.4 million American Indians and Alaskan
Natives as part of the Federal Government's trust obligations. The IHS
system, located primarily on or near reservations, includes 49
hospitals, 190 health centers, and almost 300 other clinics.
Prevention Services: Prevention can go a long way to improve
American's health. Measures to protect public health can be as basic as
providing good sanitation and as sophisticated as preventing bacteria
from developing resistance to antibiotics. State and local health
departments traditionally lead such efforts, but the Federal
Government--through HHS' Centers for Disease Control and Prevention--
also provides financial and technical support. For a half-century, CDC
has worked with State and local governments to prevent syphilis and
eliminate smallpox and other communicable diseases. More recently, CDC
has focused its efforts on preventing a host of diseases, including
breast cancer, prostate cancer, lead poisoning among children, and HIV/
AIDS.
National Institutes of Health (NIH): NIH is among the world's
foremost biomedical research centers and the Federal focal point for
biomedical research in the United States. NIH research is designed to
gain knowledge to help prevent, detect, diagnose, and treat disease and
disability. NIH conducts research in its own laboratories and clinical
facilities; supports research by non-Federal scientists in universities,
medical schools, hospitals, and research institutions across the Nation
and around the world; helps train research investigators; and fosters
communication of biomedical information.
At any one time, NIH supports 35,000 grants to universities, medical
schools, and other research and research training institutions. It also
conducts over 2,000 projects in its own laboratories and clinical
facilities. NIH research has helped to achieve many of the Nation's most
important public health advances, such as reducing mortality from heart
disease, the Nation's number one killer, by four percent from 1971 to
1991; reducing death rates from stroke by 59 percent over the same
period; and increasing the five-year survival rate for people with
cancer to 52 percent. Recent NIH-sponsored research has generated
significant advances in treatments for individuals infected with HIV,
medications for Alzheimer's disease, and revolutionary innovations in
molecular genetics and genomics research.
Food and Drug Administration: The Food and Drug Administration (FDA)
spends about $1 billion a year to promote public health by helping to
ensure--through pre-market review and post-market surveillance--that
foods are safe, wholesome, and sanitary; human and veterinary drugs,
biological products, and medical devices are safe and effective; and
cosmetics and electronic products that emit radiation are safe. FDA also
helps the public gain access to important new life-saving drugs,
biological products, and medical devices. It leads Federal efforts to
ensure the timely review of products
[[Page 183]]
and ensure that regulations enhance public health, not serve as an unnecessary regulatory burden. In addition, the FDA supports research, consumer education, and the development of both voluntary and regulatory measures to ensure the
safety and efficacy of drugs, medical devices, and foods.
Food Safety and Inspection Service (FSIS): FSIS inspects the Nation's
meat, poultry, and egg products, ensuring that they are safe, wholesome,
and not adulterated. With annual funding of almost $600 million, agency
staff inspect all domestic livestock and poultry in slaughter plants,
and conduct at least daily inspections of meat, poultry, and egg product
processing plants. In 1996, FSIS issued a major regulation that will
begin to shift responsibility for ensuring meat and poultry safety from
FSIS to the industry. The regulation should allow FSIS to better target
its inspection resources to the higher-risk elements of the meat and
poultry production, slaughter, and marketing processes.
Federal Employees Health Benefits Program (FEHBP): Established in
1960, the FEHBP is America's largest employer-sponsored multiple-choice
health program, providing $17 billion in comprehensive hospital and
major medical benefits a year to about 9.6 million Federal workers,
annuitants, and their dependents. About 86 percent of all eligible
Federal employees participate in the FEHBP, and they select from nearly
400 health insurance carriers that offer a broad choice of delivery
systems. The FEHBP offers full coverage upon enrollment--without medical
examinations or restrictions based on age, current health, or pre-
existing condition.
Veterans' Health Care
With a proposed 1998 health budget of $17.5 billion (including
receipts), the Department of Veterans Affairs (VA) provides health care
services to 2.9 million veterans through its national system of 22
integrated health networks, consisting of 173 hospitals, 491 outpatient
clinics, 135 nursing homes, and 40 domiciliaries \2\. VA is an important
part of the Nation's social safety net because almost half of its
patients are low-income veterans who might not otherwise receive care.
It also is a leading health care provider for veterans with substance
abuse problems, mental illness, HIV/AIDS, and spinal cord injuries
because private insurance usually does not fully cover these illnesses.
---------------------------------------------------------------------------
\2\ Domiciliaries serve homeless veterans and veterans who require
short-term rehabilitation.
---------------------------------------------------------------------------
VA's core mission is to meet the health care needs of veterans who
have compensable service-connected injuries or very low incomes. The law
makes these ``core'' veterans the highest priority for available Federal
dollars for health care. But, VA may provide care to lower-priority
veterans if resources allow and if the needs of higher-priority veterans
have been met.
In recent years, VA has reorganized its field facilities from 173
largely independent medical centers into 22 Veterans Integrated Service
Networks charged with giving veterans the full continuum of care. VA
also has won legislation easing restrictions on its ability to contract
for care and share resources with Defense Department hospitals, state
facilities, and local health care providers.
Health Research: VA's research program, for which the budget proposes
$234 million in 1998, conducts basic, clinical, epidemiological, and
behavioral studies across the entire spectrum of scientific disciplines.
The program seeks to improve the medical care and health of veterans,
and enhance the Nation's knowledge of disease and disability.
Health Care Education and Training: The Veterans Health
Administration is the Nation's largest trainer of health care
professionals. About 108,000 students a year get some or all of their
training in VA facilities through affiliations with over 1,000
educational institutions. The program provides training to medical,
dental, nursing, and associated health professions students to support
VA and national work force needs.
Defense Department Health Care
The Defense Department (DOD) has two basic, related medical missions:
(a) provide, and be ready to provide, medical services and support to
the armed forces during military operations, and (b) provide peacetime
medical services to members of the armed
[[Page 184]]
forces, their dependents, and other beneficiaries entitled to DOD health care.
The Defense Health Program (DHP) utilizes over 100,000 military
members and 43,000 civilians in 115 hospitals and 471 clinics world-wide
to provide medical and dental services. DOD beneficiaries also receive
medical care from private health professionals under the Civilian Health
and Medical Program of the Uniformed Services (CHAMPUS) medical
insurance program, and its managed care component, TRICARE.
About 8.2 million people across the world are eligible for benefits
from DOD's health system. DHP's annual direct costs, including
operations and procurement, are about $10.2 billion; personnel costs add
another $5.2 billion.
DOD's medical research and development (R&D) program funds activities
ranging from basic and applied research through development on health
issues unique to deployed military forces. The program works to develop
vaccines against diseases endemic to countries outside of the U.S.;
field-deployable blood products, blood substitutes, and resuscitation
fluids; technologies for assessing and treating massive hemorrhage and
severe trauma; and methods to prevent injury during military operations.
The budget also proposes $25 million in 1998 for HIV R&D.
Regulatory and Administrative Issues
The sheer size and market share of Medicare and Medicaid
significantly affects the private health care market. Medicare and
Medicaid's coverage, reimbursement, quality of care, and information
policies frequently become the accepted standards for the private sector
over time. In addition, the Federal Government monitors Medicare and
Medicaid's regulation of quality of care and reporting and record-
keeping requirements for health facilities in order to evaluate possible
additional costs on privately-insured individuals, private health care
providers, and State and local governments.
Tax Incentives
Federal tax laws help finance health insurance. First, employer
contributions for workers' health insurance premiums are excluded from
workers' taxable income. Second, self-employed people may deduct a
certain percent (30 percent in 1996, rising to 80 percent in 2006 and
beyond) of what they pay for health insurance for themselves, their
spouses, and their dependents. Third, individuals who itemize may deduct
certain expenses for health care--such as insurance premiums that
employers do not pay; expenses to diagnosis, treat, or prevent disease;
and expenses for certain long-term care services and insurance
policies--to the extent that these expenses exceed 7.5 percent of the
individuals' adjusted gross income. Total health-related tax incentives
(including other minor provisions) will reach an estimated $85 billion
in 1998, and $487.7 billion from 1998 to 2002.