[Joint House and Senate Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 108-690
GETTING OLDER, STAYING HEALTHIER:
THE DEMOGRAPHICS OF HEALTH CARE
=======================================================================
HEARING
before the
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
JULY 22, 2004
__________
Printed for the use of the Joint Economic Committee
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JOINT ECONOMIC COMMITTEE
[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]
SENATE HOUSE OF REPRESENTATIVES
Robert F. Bennett, Utah, Chairman Jim Saxton, New Jersey, Vice
Sam Brownback, Kansas Chairman
Jeff Sessions, Alabama Paul Ryan, Wisconsin
John Sununu, New Hampshire Jennifer Dunn, Washington
Lamar Alexander, Tennessee Phil English, Pennsylvania
Susan Collins, Maine Adam H. Putnam, Florida
Jack Reed, Rhode Island Ron Paul, Texas
Edward M. Kennedy, Massachusetts Pete Stark, California
Paul S. Sarbanes, Maryland Carolyn B. Maloney, New York
Jeff Bingaman, New Mexico Melvin L. Watt, North Carolina
Baron P. Hill, Indiana
Paul A. Yost, Executive Director
Wendell Primus, Minority Staff Director
C O N T E N T S
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Opening Statement of Members
Senator Robert F. Bennett, Chairman.............................. 1
Representative Pete Stark, Ranking Minority Member............... 2
Witnesses
Kenneth G. Manton, Ph.D., Research Director, Center for
Demographic Studies, Duke University, Durham, North Carolina... 4
James Lubitz, M.P.H., Acting Chief, Aging and Chronic Diseases,
Statistics Branch, Centers for Disease Control and Prevention,
Hyattsville, Maryland.......................................... 7
James F. Fries, M.D., Professor of Medicine, Stanford University
School of Medicine, Stanford, California....................... 9
Judith Feder, Ph.D., Professor and Dean of Public Policy
Institute, Georgetown University, Washington, DC............... 12
Submissions for the Record
Prepared statement of Senator Robert F. Bennett.................. 27
Prepared statement of Representative Pete Stark, Ranking Minority
Member......................................................... 28
Prepared statement of Kenneth G. Manton, Ph.D., Duke University,
Center for Demographic Studies................................. 29
Prepared statement of James Lubitz, Acting Chief, Aging and
Chronic Diseases, Statistics Branch, National Center for Health
Statistics Centers for Disease Control and Prevention, U.S.
Department of Health and Human Services........................ 53
Prepared statement of James F. Fries, MD, Professor of Medicine,
Stanford University School of Medicine......................... 58
Prepared statement of Judith Feder, Ph.D., Professor and Dean,
Georgetown Public Policy Institute, Georgetown University...... 79
GETTING OLDER, STAYING HEALTHIER:
THE DEMOGRAPHICS OF HEALTH CARE
----------
THURSDAY, JULY 22, 2004
Congress of the United States,
Joint Economic Committee,
Washington, DC
The Committee met at 10 a.m., in room SD-628 of the Dirksen
Senate Office Building, the Honorable Robert F. Bennett,
Chairman of the Committee, presiding.
Senators present: Senator Bennett (Chairman of the
Committee).
Representatives present: Representative Stark.
Staff present: Tom Miller, Leah Uhlman, Nancy Marano, Brian
Higginbotham, Zach Jones, Colleen Healy, Wendell Primus, John
McInerney, Debra Veres, and Nan Gibson.
OPENING STATEMENT OF SENATOR ROBERT F. BENNETT, CHAIRMAN
Chairman Bennett. The Committee will come to order.
Good morning and welcome to the hearing on The Changing
Demographics of Health Care.
Today, we will examine long-term trends in the health
status and health spending levels of elderly Americans.
We are meeting at a time of various pressures and
competition for our attention. The 9/11 Commission report is
coming out this morning. And the Senate has scheduled a series
of votes starting at 11 o'clock.
So I've decided to start right on time and see if we can
get it all done before these other pressures close in on us.
But I'm grateful to our witnesses for their willingness to
be here today and share with us their expertise.
The two most obvious trends are that we are living longer
and spending more on health care costs. The connection between
these two trends is complex. It is not a direct cause-and-
effect situation.
We need to understand it better.
Some might worry that we're caught on a fiscal treadmill in
which long life spans beyond the age of 65 will simply add to
the mounting financial burden of our commitments to fund public
entitlement programs like Medicare and Medicaid and Social
Security.
But that view, in my view, focuses too narrowly on the
sheer duration of life and the potential costs connected with
it, without examining the quality and value of extra years of
life.
Even though we hear complaints about our health care system
and are concerned about various indications of unhealthy habits
and practices, there's a growing body of evidence that suggests
that Americans are not just living longer--they're also living
in better health overall.
We need to understand the implications of that.
Today's hearing will first take a look at what we know
about a possible decline in chronic disability rates among the
elderly and what this trend implies for the future. Then we
will explore whether it is possible to delay the onset of
serious illnesses while extending life spans, particularly
through effective health promotion and disease prevention
strategies.
We'll examine how by changing the underlying demand for
health care services, instead of just trying to control the
supply of health care, we could affect the future structure and
financing of our public health programs.
Finally, we will discuss whether a longer life span,
combined with better health, can maintain and enhance the vital
treasure of human capital that we need to maintain a vigorous
labor force and strong economic growth in an aging society.
As a personal note, I'm planning to do my part by extending
my working life at least another 6 years----
[Laughter.]
Chairman Bennett [continuing]. If the voters of Utah will
agree. And that will take me a full 10 years beyond the normal
retirement age.
I hope to set a vigorous example.
Of course, before we paint too rosy a picture of the
future, we should carefully assess where we've been and where
we are now.
So today, we have a panel filled with some of the nation's
leading experts in the field of health care demographics. We
hope that they will not only highlight and interpret the data
for us, but that they will also offer some suggestions as to
how we can harness the full potential of our current
investments in health care and health promotion.
Mr. Stark.
[The prepared statement of Chairman Bennett appears in the
Submissions for the Record on page 27.]
OPENING STATEMENT OF REPRESENTATIVE PETE STARK, RANKING
MINORTITY MEMBER
Representative Stark. Boy, Mr. Chairman, you had me there
for a moment. I thought what you said before we paint too rosy
a picture of the future, you were going to then recognize me.
I didn't think that was the best way to introduce me.
[Laughter.]
Chairman Bennett. Well, I think you too are setting an
example.
Representative Stark. Rarely, can I claim to outdistance
the Chair. But in this particular topic, I must claim
seniority, experience, if that counts for anything in this
game.
When it comes to unhealthy habits and practices, I have a
suspicion that I know more about that than the Chairman.
[Laughter.]
But having said that, I have extended my tenure far beyond
any normal retirement age. But I have to do it 2 years at a
time, and I am also going ahead.
I want to thank you for holding this hearing. I look
forward to what the witnesses say on a public policy issue.
I know that Dr. Feder will talk about a need for a
federally funded program. I have reviewed the marvelous opening
statement that the staff suggested for me. I'd ask that it
appear in the record.
Chairman Bennett. Without objection.
Representative Stark. But I'd like to take one moment--this
is something that I did with your colleague, Mr. Kennedy.
We had a commission a thousand years ago on long-term care.
One of the concerns, whether it be institutional care or
supporting care in the home, I can assure the Chair that things
don't fall off, but they get a little rusty as one gets older.
Your shoes get further away and steps get higher.
But it does seem to me, and we'll get into a little
liberal/conservative conundrum here, that long-term care is the
poster child of an opportunity for social insurance.
I want to make a couple of points. Perhaps the witnesses
will debate this.
There is no actuarial determination of who may or may not
need long-term care in any age segment. It's completely random.
And that pretty much takes the idea of insurance, if you will,
and particular commercial insurance, off the table.
Almost all the long-term policies now are nothing but kinds
of savings, cash-value insurance. Sometimes you get it back,
sometimes you don't.
So if it's random, it is beyond the ability of most average
Americans to pay for it reasonably.
It doesn't necessarily just hit folks our age. There are a
lot of 16-year-olds who are dumb enough to ride their bicycles
or motorcycles without helmets and end up needing care--again,
a random question.
Therefore, if we, as we do in other things, have a small
payment, as small as we can make it, and have a benefit.
It seems to me that the charges are relatively uniform
across the country. I don't know as there are huge variations
in the Medicaid charges now.
We have an opportunity in this country in one format or
another to have a social insurance program--you might want to
income-
relate it. There's a lot of ways that we can look at it.
But it just seems to me it is a need which nobody disagrees
exists. And because it comes randomly and because it does these
things, might very well be a target for some kind of social
insurance--hopefully, that would be funded by those who would
use it and not be a burden on the government.
I'd hope maybe the Chair would at some point in the future
like to discuss that as possible legislation, assuming we both
get re-elected, we'll have time to do these sorts of things.
[Laughter.]
So I thank you for this hearing. I apologize that I won't
be able to stay for the full hearing, but I want to commend you
for getting us going on this topic.
Thank you very much.
[The prepared statement of Representative Stark appears in
the Submissions for the Record on page 28.]
Chairman Bennett. Thank you, sir.
You will find in the liberal/conservative clashes around
here, that's a very mild difference compared to some of the
others that we've had.
So we've come a ways.
Let me introduce the members of the panel and we'll hear
from you in this order.
Dr. Kenneth Manton of the Center for Demographic Studies at
Duke University.
Dr. Manton is noted for his work on the National Long-Term
Care Survey, which is a study that emphasizes remarkable
declines in the prevalence of chronic disability among the
elderly in recent decades.
Then we'll hear from James Lubitz of the National Center
for Health Statistics. Mr. Lubitz has examined the connection
between increased longevity and health care spending among the
elderly in a number of articles.
He suggests that the effects of longevity on Medicare acute
care services and Medicaid long-term care benefits may in fact
run in different directions.
Dr. James Fries of Stanford University. He first coined the
theory of morbidity compression several decades ago to explain
how the onset of serious disease and chronic disability may be
delayed until later in life so that a larger portion of our
life spans are spent in good health.
Then Dr. Judy Feder, who is a professor and dean of Policy
Studies at Georgetown University. She's also a senior scholar
at Georgetown's Institute of Health Care Research and Policy.
Dr. Feder previously served 3 years as principal deputy
assistant secretary at the Department of Health and Human
Services and has written extensively about the financing of
Medicare, Medicaid, and long-term care in particular.
We're honored to have this group of experts with us.
Dr. Manton, we'll hear from you first.
OPENING STATEMENT OF KENNETH G. MANTON, Ph.D., RESEARCH
DIRECTOR, CENTER FOR DEMOGRAPHIC STUDIES, DUKE UNIVERSITY,
DURHAM, NORTH CAROLINA
Dr. Manton. Thank you, Mr. Chairman. I'll just highlight my
statement and be available for questions after the
presentations.
My primary areas of research are in mathematical and
medical demography. My comments are primarily data-driven. I
won't interpret them very much, but I'll lay out the facts as I
see them and can answer questions on any aspects or facets of
that data.
As you mentioned, my recent research is heavily focused on
the application of the 1982, 1984, 1989, 1994, 1999 and now,
the 2004, National Long-Term Care Survey, to health problems of
the elderly and the Medicare and Social Security systems.
The Long-Term Care Survey is perhaps unique in the sense
that it's drawn from a Medicare list sample and covers people
in all types of residences, including assisted living, as well
as nursing home.
We can directly focus on the question of long-term care and
long-term care insurance. We actually have an actuarial center
that specializes in that and in setting up criteria for
qualification for long-term care insurance.
By way of reference and a bit of context, I participated in
the Senate Finance Committee hearings in 1982, when the
decision was originally made to increase the retirement age for
Social Security at age 67 staring in the year 2000.
The position that I thought then and continue to think is
conservative.
The problem then, and what was very important in those
hearings is that we lacked data on how health had changed as
life expectancy increased.
I think we now have a significant amount of data to reflect
on those issues again, both in changing the retirement age and
in looking at the health needs of the underlying population.
In 1999, I participated in closed-door hearings with Nick
Smith of Michigan on the potential for increasing life
expectancy and active life expectancy.
At that hearing was Dr. Haseltine, who now runs something
like human genome sciences and the Social Security actuaries.
Again, we were sort of blue-skying issues of how much life
expectancy might increase and what would be the trailer effect
on active life expectancy.
The 1982 to 1999 Long-Term Care Survey provides me with the
basis to demonstrate the soundness of the position I was
promulgating in terms of looking at life expectancy, active
life expectancy, and the proposition that the health care
system in the United States may be the world's best, with the
primary problem being the equity of distribution of health
services across the population.
If you look at that population or recognize its size (290
million people) and the fact that there are some very
disadvantaged groups, for 280 million of those people, their
life expectancy might be greater than in Japan.
To that point, I tried to provide some simulation analyses
in the written testimony.
Some of the recent important observations from the Long-
Term Care Survey are:
There are large declines in chronic disability, 1.7 percent
per annum, from 1982 to 1999, with declines accelerating, being
fastest from 1994 to 1999, conservatively being 2.6 percent.
Other people at our center, including our actuary, come up
with a higher number like 3\1/2\ percent on a different basis.
But the finding is robust--a decline and an acceleration of
decline in the prevalence of chronic disability.
More recently, because the Long-Term Care Survey is linked
to Medicare expenditure data, we're able to look within
disability categories and health categories, if you will, as to
what's been happening to the inflation-adjusted per capital
Medicare expenditures.
This finding was interesting.
In the growing non-disabled elderly population, per capital
inflation-adjusted costs had declined from 1982 to 1999.
In the most severely disabled category, from 1982 to 1999,
calculated on the same basis, costs were increasing.
So there's interaction between Medicare cost expenditures
on a personal basis and the decline of disability.
Larger numbers of non-disabled with lower costs than
declining costs inflation-adjusted, higher costs for the
smaller, severely disabled population.
So, again, it's a question of targeting services to this
very severely disabled group and providing preventative
services--and by preventative, not just chronic diseases, but
the promotion of functional capacity.
We use the ADLs and IDLs, active daily living capacities
and instrumental daily living capacities, because they involve
not just physical activity, but a morale component or a
psychological component.
You can climb a stair with a little bit of pain. You can
take Ibuprofen if you want to.
So we use that as an indicator both of a combined physical
and psychological profile of the health of the population.
So in addition, probably one of the more controversial
findings, but I think it's been pretty well established and
I've talked with my colleagues about this basis, is that we
found declines in the elderly institutional population in both
relative and absolute terms.
So, as a consequence, there have been examinations of the
effects of trends of Medicare expenditures, and you see the
declines with later ages. But reinforcing that may be the fact
that institutional population size is going down. People are
transferring from nursing homes to assisted living. Even the
total size of the nursing home bed populations and assisted
living and nursing home is declining.
I can expand on those comments.
Just to sort of conclude on three propositions to consider.
The first proposition is Social Security and Medicare
projections are based on overly pessimistic assumptions about
the health and life expectancy of the U.S. population.
We may have the highest life expectancy, at least for 95 to
98 percent of the U.S. population.
Number 2, the health of the U.S. elderly population is
better than our national vital statistics system indicates.
Active life expectancy estimates based on the 1982 to 1999
National Long-Term Care Survey suggests that the United States
may have the world's best health care system.
The problem is equitable distribution of care.
From 1982 to 1999, life expectancy increased for both males
and females, 4.5 years. Active life expectancy increased about
80 to 90 percent of that, about 3.8 to 3.9 years.
So it's not just an expansion of life expectancy. There's a
considerable increase in active life expectancy underpinning
that.
Then the final proposition--significant improvements in
both the Social Security administration and Medicare trust
funds could be realized if the healthy U.S. elderly population
could be measured and projected correctly, and that the health
care system is appropriately directed toward increasing human
capital.
That we take NIH research and we take Medicare and we focus
it toward improving the functional capacity of the elderly
population in the United States
I think that concludes my comments.
Chairman Bennett. Thank you very much.
Mr. Lubitz.
[The prepared statement of Dr. Manton appears in the
Submissions for the Record on page 29.]
OPENING STATEMENT OF JAMES LUBITZ, M.P.H., ACTING CHIEF, AGING
AND CHRONIC DISEASES, STATISTICS BRANCH, CENTERS FOR DISEASE
CONTROL AND PREVENTION, HYATTSVILLE, MARYLAND
Mr. Lubitz. Thank you, Mr. Chairman, and Mr. Stark. I'm
pleased to be here.
I'm going to discuss research on medical expenditure
patterns from age 65 until death and some possible implications
for the future.
As background, our health care system has changed
dramatically since Medicare's beginning. Health care spending
has grown considerably, particularly for the elderly.
Expectations for medical care have changed. In the 1970's,
there was serious discussion of the idea that medical spending
in the aggregate did little good and that we were wasting
medical care on aggressive interventions for old sick people.
Today, with numerous treatments to improve health, we have
high expectations for medical care.
There is new evidence that medical care is cost-effective
in the aggregate and that the health of the elderly may be
improving.
The effect of improved health on health spending is a
complex subject, but some believe that it will lower costs.
Now I'm going to highlight some findings on the
relationship of demographic factors to health care spending.
First, I'd like to mention findings on cost of final years
of life.
Costs for persons in their last year of life are about 28
percent of annual Medicare costs. This percentage has held
steady despite all the changes in our health care delivery
system.
Another finding is that we find lower Medicare costs in the
last year for older decedents as compared to younger ones.
Now we also looked at Medicare costs from age 65 until
death. We looked at the question of how much long-lived persons
cost Medicare as compared to others.
We find, and you can see on the chart in the Medicare line,
that past age 70 or 75, each additional year adds little to
Medicare costs from 65 to death. Whether an enrollee dies at
age 80 or at age 90, Medicare will always pay the high final
year costs and the added years covered are the healthy low-cost
years far from the end of life.
Now let's look at non-Medicare services.
Although Medicare costs in the final years are lower for
older decedents, this is not the case for non-covered services.
Nursing home expenses in the last 2 years of life are much
higher for older decedents and, in fact, exceed Medicare
payments for decedents aged 90 and over.
Concern about costs in the final year of life has often
focused on expensive, high-tech care. But long-term care costs
are more important for the oldest.
The effect of longevity on total health care spending is
different from the effect on just Medicare.
That's the top line on the chart, which is at a 45-degree
angle.
Because long-term care costs accelerate with age, they
offset the considerably lower Medicare costs in the final years
for older decedents. Each added year lived adds the same amount
to cumulative health care costs from age 65 to death.
Again, that's the 45-degree line.
Our Nation will experience a large growth in the number of
the elderly and an increase in life expectancy. Our simulations
show that the increase in the numbers of the elderly will have
by far the largest effect on future spending, both Medicare and
non-Medicare.
Increased life expectancy beyond age 65 will have a small
effect on Medicare and a modest effect on long-term care
spending.
Next, we simulated spending for persons reporting good
health at age 70 versus those in poor health, and we found that
healthy persons live longer, but had similar cumulative health
care spending from age 70.
That's total spending--Medicare and non-Medicare.
Their lower yearly costs offset the effect of more years to
accumulate costs.
I'll finish with some implications.
Life expectancy increases may result from healthier
lifestyles, preventive services, or costly new medical
advances. The future role of each is unclear.
There is new evidence that our favorable health risk
profile in middle age may result in both longer life and lower-
than-average Medicare costs.
The costs of health promotion, of course, in the pre-
Medicare years are not borne by Medicare.
Assuming that today's age-related patterns of frailty and
cognitive loss persistent to the future, greater longevity will
increase the need for long-term care, which is paid mostly by
Medicaid and by patients and families.
However, the compression of morbidity hypothesis posits
that the amount of time spent in poor health will be less among
tomorrow's elderly.
In summary, it is difficult to predict the future health of
the elderly and its relation to spending. We can simulate the
effects of future scenarios, but cannot predict the future,
except for the certainty of a large increase on the number of
elderly.
I'd be glad to answer any questions.
Thank you.
Chairman Bennett. Thank you, sir.
Dr. Fries.
[The prepared statement of Mr. Lubitz appears in the
Submissions for the Record on page 53.]
OPENING STATEMENT OF JAMES F. FRIES, M.D., PROFESSOR OF
MEDICINE, STANFORD UNIVERSITY SCHOOL OF MEDICINE, STANFORD,
CALIFORNIA
Dr. Fries. Senator Bennett, Representative Stark, ladies
and gentlemen, it's a pleasure to be here.
I'll give you some headlines in this brief presentation.
The written testimony has more discussion of those points, and
I'll be happy to respond and elaborate with them as we go.
Health care costs have resumed double-digit annual
increases and are in crisis.
Existing control mechanisms, now and in the past,
principally based upon rationing of supply, have failed to be
effective.
The illness burden of the nation, driven by the health
problems of increasing numbers of seniors, is of mammoth
amount.
The ironic reality is that we already know how to improve
health and at the same time, reduce medical care costs.
Healthier people need less medical care. They place less
burden on the demand side of the equation.
We know how to postpone illness. It is done by prevention.
Three false beliefs underlie our failure to systematically
approach postponement of illness.
First, ``the data are soft.'' False. There's far more
evidence for the effectiveness of well-designed preventive
approaches than for most of what we now call evidence-based
medicine.
Second, ``there is a long lag of 20 years or more before a
change in the health risk behavior is likely to prevent a
disease event such as a heart attack, and we have a crisis
now.''
The worksite version of this fallacy is ``I will just be
making my employees healthier for their next employer.''
False. Measurable reductions in costs and improvement in
health and productivity, on the order of 10 to 20 percent, are
achievable in the first 12 months of sound programs and
continue to build thereafter.
Third, ``people with good health habits live longer and
will have greater medical care costs.'' Also false, as Dr.
Lubitz has just told us.
Longer-lived persons do not have increased cumulative
lifetime or Medicare costs.
I will make three major points and explore their policy
implications briefly.
First, the underlying theory behind health enhancement
initiatives is the ``compression of morbidity.'' We have a
chart showing the compression of morbidity in which three
potential lives are diagrammed, from birth on the left to death
on the right.
The current morbidity and medical care costs in life are
concentrated between the ages of, say, 56 and 76.
The unhappy scenario would be the middle scenario in which
there is an extension of longevity and an increase in the area
represented by the shaded area, so that we have prolonged the
period of dying.
The third scenario is a world in which we emphasize the
quality of life and the postponement of the onset of illness;
morbidity is compressed, squeezed in-between a later point of
onset and the age of death, which, while moving upwards, may be
moving upwards more slowly than the amount of postponement
which we achieve.
Kenneth Manton has estimated that if mortality rates
decline at 1 percent a year, which is their historic value, and
disability rates decline at 2 percent a year, which is true of
the Long-Term Health Care Survey, then morbidity is currently
being compressed on a population basis in the United States.
So, what was a controversial hypothesis of the compression
of morbidity years ago is actually coming true, even though we
have not systematically begun to approach and target the
postponement of the onset of illness. This is a very different
health improvement strategy than that which we have used.
Second, the onset age of chronic infirmity potentially may
be postponed by up to 12 years, certainly by 7 to 12 years, so
that the amount of postponement by lifestyle change of the
onset of infirmity is very substantial.
Third, multiple large, randomized, controlled scientific
trials have proved the effectiveness and cost effectiveness of
sound preventive approaches to the postponement of illness.
We have good science.
The overarching objectives are to improve the national
health and to decrease medical care expenditures.
The facts, just briefly:
We already know how to improve health and save money. It
requires postponement of the onset of illness in the
individual. And there are policy ways of targeting that.
The compression of morbidity paradigm provides an
underlying structure, and I covered those points.
Also covered, the point that morbidity compression is
currently occurring, that epidemiologic studies show potential
disability, the postponement of 7 to 12 years, and that there
are a lot of randomized and observational trials which support
this data.
Of interest, and neglected, in fact, is that there are
effective health enhancement and cost-savings programs; there
are a number that have now received the C. Edward Koop National
Health Award, some 70 programs.
Successful programs go beyond health promotion considered
as simply risk reduction. They contain specific additional
elements:
(1) Improvements in personal self-efficacy and health
confidence.
(2) Improvement in self-management skills whereby patients
take a greater role in determining the decision structure of
what happens to them in the medical care system.
(3) Programs directed at high-risk individuals.
(4) Programs which are involved at persons who have chronic
illnesses already, where the costs are present.
(5) And finally, last year of life programs, where there
are untapped approaches to improve the quality of life. And
that area is suggested by Dr. Lubitz again.
So there are a number of available approaches that are in
the area of increasing autonomy of the individual, which
include personal health decisionmaking and attitudes toward
health and pursuing lifestyles, which are at least as important
as and more immediate than are the effects that come from the
stopping-smoking programs or the weight-reduction programs,
more strictly risk reduction models.
So it's more complicated than we have thought, and there
are new opportunities, and that's actually good news.
The policy initiatives need to focus on the big targets.
With the WHO, we're now saying 3; 4; 50.
Three risk factors--smoking, diet, obesity, lack of
exercise.
Four diseases--heart disease, cancer, diabetes, chronic
lung disease.
Cause fifty percent of illness.
To effect changes, you need to hit the big targets.
Craft careful, prudent, yet urgent approaches. This is a
crisis. We need to do things now. Yet, we don't want to provide
funding mechanisms for programs which are ineffective.
We have to balance the need for proof with the need for
progress.
Multiple approaches--legislative, community work side,
public education incentives, and others are needed.
Tailored personalized population-based computer-assisted
programs appear to be the best of presently available
interventions.
Keep these approaches strictly bipartisan. They are.
Everyone is served, regardless of what one's opinions are about
what changes need to be made in the health care system. If
there's less disease, and a lesser need for services--everyone
wins regardless of the side of the aisle on which they sit.
Use this Committee in a major role to reconcile health and
economic goals.
We need a blessing on the economic argument side because if
we can come with proposals which are strong and sound and which
will improve health and save money, there is no reason not to
widely implement such proposals.
The problem is overcoming the skepticism. We're fortunately
hearing here from people with a lot of stature in the area that
the economic argument is a strong one.
Granting that, then this Committee, sitting where it does,
has the ability to influence a lot of things.
Finally, some specific actions that are needed.
(1) Support the Senior Risk Reduction Project, the SRRP
demonstration, which will be a random sample of Medicare
people. It just needs to get started. It's planned. It's ready
to go.
Hopefully, it will get going this year.
(2) The HeLP bill, recently introduced as S. 2558, by
Senator Harkin--it's an omnibus bill with a lot of very good
features in it, as I know Senator Bennett is aware.
(3) The Health Promotion FIRST Act is going to be
introduced by Senator Lugar in the next week or so. It provides
an improved health promotion scientific infrastructure.
It will train better, more rigorous people and enlarge the
field of developing and improving programs.
(4) We need reimbursement initiatives for qualified
prevention coverage. We need incentives of some kind for work
site health promotion programs.
The Harkin bill actually talks about some tax credits.
(5) And we need, finally, rigorous external evaluation of
these efforts. They have to proceed under a bright light. And
they have to be observed by skeptics.
We can improve health and reduce medical care costs
substantially with currently proven approaches to postponement
of morbidity.
These approaches in turn can be refined and improved.
Demand-side health improvement initiatives benefit the
individual, the payer and the society. They do not encourage or
require rationing. They are entirely bipartisan. They are not
inconsistent with other cost containment initiatives.
They have not been tried. They can work.
Thank you.
Chairman Bennett. Thank you very much.
Dr. Feder.
[The prepared statement of Dr. Fries appears in the
Submissions for the Record on page 58.]
OPENING STATEMENT OF STATEMENT OF JUDITH FEDER, Ph.D.,
PROFESSOR AND DEAN OF PUBLIC POLICY INSTITUTE, GEORGETOWN
UNIVERSITY, WASHINGTON, DC
Dr. Feder. Thank you, Mr. Chairman. It's a pleasure to be
here with you today.
Mr. Stark, I appreciate the opportunity to participate with
such esteemed experts on this topic.
I'm going to shift our focus a little bit to the financing
of care, particularly long-term care, and the implications of
aging for that financing.
We've heard from Dr. Manton about declines in the rates of
disabilities. We've heard from Dr. Fries about the importance
of improving health and prevention and making those declines
come about. And we've heard from Mr. Lubitz about the impact of
longevity, especially for very old people, on long-term care
costs, creating higher long-term care costs, and of the
overwhelming effect of growing numbers of elderly people on
total costs and on long-term care costs.
As I turn to financing and the implications of these
factors for financing, my basic premise will be that even if
the rate of disability declines--and we certainly hope that it
does and I would support efforts to making that happen--future
increases in the number of older people, especially very old
people, will mean a greater need for long-term care.
The population over age 85 is expected to double by the
year 2030, and to quadruple by 2050.
That means that the rate of disability would have to be
half or a quarter of current rates to keep the number of people
likely to need long-term care from growing.
While such declines are by no means impossible and we
should certainly seek to achieve them, our best bet is that we
will need more resources to meet care needs in the future than
we are investing today. Especially since we're really not
meeting those needs very well right now.
Let me elaborate on the inadequacies of current financing
policy and the implications for the future.
As Mr. Stark indicated, the need for long-term care is an
unpredictable and potentially financially catastrophic event,
best dealt with through insurance.
For the almost 40 percent of the long-term care population
who are under the age of 65, the need for long-term care is
clearly unpredictable.
Though the probability of needing long-term care increases
with age, even among the elderly the need and the extent of
need varies considerably.
Thirty percent of people retiring today are estimated as
likely to need no long-term care before they die, while at the
other extreme, 20 percent are estimated to need care for 5
years or more.
For those who need extensive care, costs exceed most
families' ability to pay--today, more than $50,000 a year for
nursing home care and about $26,000 a year for regular home
care.
But we lack private or public insurance to protect against
the unpredictable financial catastrophe that long-term care
represents.
Though sales of private long-term care insurance are
growing, its inadequacies as a solution to our broad needs
should be obvious from our experience with the exclusions,
benefit limitations, and marketing costs of health insurance
marketed to individuals. What doesn't work for health care will
work even worse for long-term care.
Public insurance is also lacking. Medicare covers very
little long-term care, and Medicaid, which provides invaluable
resources and services for long-term care and is the nation's
long-term care safety net, does not protect people against
financial catastrophe. It finances services only with
impoverishment--that is, after catastrophe strikes.
Medicaid's adequacy is further weakened by its emphasis on
nursing home care rather than care at home, the considerable
variation in the benefits and eligibility across states, and
the vulnerability of its benefits to limited state revenue
capacity and other pressing state needs--education high among
them.
Overall, despite substantial Medicaid and out-of-pocket
spending on long-term care, and extraordinary efforts by
families who provide most of the long-term care people receive
at home, one in five elderly people outside nursing homes
report unmet need, frequently resulting in serious consequences
like falling, soiling themselves, or inability to bathe or to
eat.
Without a change in policy, unmet need will likely
increase. An aging population will put growing pressure on all
state Medicaid programs. But states with the greatest increase
in their older, relative to their younger, working age
citizens, like Colorado, Utah, and Oregon, will face the
greatest pressure.
Since many of the states with the greatest change are
today's lowest spenders per worker on Medicaid term care, long-
term care financing will likely be even less equitable and
adequate in the future than it is today.
What should we do about it?
We really have a choice--whether we want to live in a
society in which we assure access to affordable quality care
for people who need it, or in a society in which we leave
people in need to manage as best they can on their own.
I hope that we opt for the first.
To address both current and future care needs requires a
commitment of public resources. And to be adequate and
effective in all states, it is Federal resources, consistent
with the Governors' frequent request that the Federal
Government assume fuller financial responsibility for those
people who are eligible for both Medicare and for Medicaid.
Expansion of public financing for long-term care could take
a variety of forms. And if public benefits are limited or
targeted, we can protect people against impoverishment and
still leave plenty of room for cost sharing or private
insurance supplementation by the better off.
Indeed, the OECD reports an increase in the number of
nations around the world adopting universal public protection
with what they call a fairer balance between public and private
financing, one that relates personal contributions to ability
to pay and one that targets the greatest benefits to the
population in greatest need. Many of these nations have
substantially larger proportions of elderly today than does the
United States, and therefore, can be instructive to us as we
adjust to an aging society.
Clearly, we will face choices in that adjustment. If we are
to be the caring society, I believe we wish ourselves to be, we
too will move in the direction of greater risk-sharing and
equity by adopting a national policy and committing the Federal
fiscal resources which will be necessary to achieve that end.
Thank you.
[The prepared statement of Dr. Feder appears in the
Submissions for the Record on page 79.]
Chairman Bennett. Thank you very much, all of you. You've
demonstrated how complex and yeasty this particular issue is.
There are a number of subtexts now running around here that I
hope we can get into.
As Mr. Stark knows, my style is to try to generate more of
a roundtable sort of conversation than the traditional
questioning/answering from the dais to the witness.
That having been said, I am going to ask some questions and
I'm sure that Mr. Stark is too, before we get into that.
But I would hope later on, we can be at a point where
people feel free to speak up and interact back and forth.
Let me see if I understand some of the points that have
been made.
Dr. Manton, I'm interested. We always talk about life
expectancy in a total population. And we always use a single
term. I know the life expectancy in Japan. I know the life
expectancy in Russia and so on.
I should have been smart enough to realize that life
expectancy varies from group to group. I'm interested in your
concept that if you take out a certain portion, which you
describe as the disabled, among the non-disabled, our life
expectancy goes up----
Dr. Manton. May be the world's best.
Chairman Bennett. May be the world's best.
Dr. Manton. For 95 percent of the U.S. population.
Chairman Bennett. Ninety-five percent.
Dr. Manton. More than any other country. Japan has 127
million. Their male-female combined life expectancy is 81
years.
I did some simple simulation studies, back-of-the-envelope
type of things, and if you simply take Hispanic workers,
migrant workers, undocumented aliens, and you take the estimate
that the census missed 7 to 14 million of them, if you take the
upper bound of 14 million and you take what's in the
literature, a life expectancy of 49 years, which is less than
many developing countries, that can change life expectancy in
the United States because it's a younger population, highly
focused, with very low life expectancy.
It can change life expectancy at birth in the United States
by 1.1 year.
Chairman Bennett. That raises a whole series of analytical
questions that I think have to be factored into the overall
equation.
Dr. Manton. Well, one of the interesting things is that if
you even compare NCH's life tables to the Social Security
actuaries' life tables, they're off by half a year. They
differ.
Same vital statistics data, two different agencies.
NCH's is a little higher and it's probably a better
estimate. The Social Security actuaries--it must be some
actuarial assumption, some sort of smoothing assumption or some
ultimate change assumption.
But it's like 0.5 to 0.6 years and guess what? It's the
same at age 90 as it is at birth.
Artificial.
Chairman Bennett. Mr. Lubitz, let me see if I understand
exactly what you're saying.
If you have a healthy lifestyle and you live longer, the
cost in total life terms remains the same, but the cost per
year will go down because you have more years.
Mr. Lubitz. That's it exactly. Our findings concern cost
from age 70 until death. That was our finding exactly.
Chairman Bennett. That's a standard mathematical model that
fits. But it has implications because if we're in the territory
that Dr. Feder is talking about and we're looking at Medicare
costs per year, if the cost per individual for his lifetime
remains the same but it's spread over, let us say, 10 years
instead of 5, the cost per individual in the Medicare program
is going to go down, in the overall.
Dr. Manton is with me mathematically on this.
Dr. Manton. Right. The per-capita, per-year cost is going
down.
So each year under the Medicare experience, per individual
is declining.
Chairman Bennett. Per capita per year. Now, the capita is
going up.
Dr. Feder. Exactly.
Chairman Bennett. The capita is going up. So let's not be
overly excited about this.
But it's nonetheless a good thing.
Dr. Manton. Right.
Mr. Lubitz. If what you're saying, Mr. Chairman, is that if
we increase the proportion of the elderly and middle-aged who
are in good health, it looks like your conclusion is correct,
yes.
Chairman Bennett. There's a pay-off. There's a pay-off at
the other end.
Dr. Fries, you seem to reinforce both of these conclusions
that say, therefore, there's an area of examination that we
need to do in terms of making our long-term forecast of what
our costs are going to be, and that there's a strong potential
that the costs will not be as high as the straight-line
extrapolation might indicate today.
Dr. Fries. That's right. But there's a harmonic all the way
across this panel because it is driven not by increases in
senior life expectancy, which will be modest, from age 65 or
from age 85.
From age 85, the change in the United States has been only
fractions of a year over the last 20 years.
What drives the equation is what Dr. Feder was saying, the
number of people in the cohorts that are rolling toward us at
this period of time.
We can't change that number.
Dr. Feder. Hopefully.
Dr. Fries. It's driven by the number of people born 85
years ago, and there are more of them every year. And they're
coming along.
So that number we're stuck with and we can predict it
pretty accurately.
Chairman Bennett. Yes.
Dr. Fries. There is another pusher, which is that more of
them get to 65, a larger percentage of each birth cohort
actually makes it to 65 or makes it to 85.
So that also is a pusher. We can estimate that pretty
cleanly.
So there are more people coming. It is probable that we'd
have to be really good at postponing illness to make up as much
on the individual basis, which is the only place that we can
make it up.
Dr. Manton. Better educated.
Dr. Fries. These other numbers are set.
Dr. Manton. They're better educated. That's another
dynamic.
Dr. Fries. Yes.
Dr. Manton. Access to health care and the ability to follow
physicians' orders.
Dr. Fries. We've been looking--and I've written on the
Long-Term Care Survey Data and what the implications are and
why are we compressing morbidity because it's clear that we
haven't gotten into the postponement of illness scenario yet.
Chairman Bennett. Yes.
Dr. Manton. Medical care has played a lot of roles. Some of
the better treatment of hypertension, for example, better
treatment of cholesterol levels and things that have happened
over this last period of time. More total joint replacements.
Some of these advances that have compressed morbidity are
on the medical side.
The future, if we do it right, and if you had the chart
that I had, you kind of contrasted the scenarios.
If you want to extend the longevity line, then you can
think about heart transplants and extreme technology employed
at the late portion of life, and it drives that whole shaded
area out. It costs a lot of money.
If you want to drive the first one by prevention, you
clearly have to get in there before it happens.
Chairman Bennett. This is the point I want to make, and
then I'll turn it over to Mr. Stark.
Dr. Feder makes the clear point that these people are
coming.
Dr. Feder. I'm a baby boomer myself. And we think it's a
good thing that we're coming.
Chairman Bennett. Yes. Mr. Stark and I both think it's a
good thing that longevity goes up.
[Laughter.]
But there's an implication in all of this which I'm not
sure we can quantify, although Dr. Manton has tried to.
That various strata in our society have very different
tracks ahead of them. I can't put my finger on it, but it just
stuck out of my memory.
If you're African-American and you have not graduated from
high school, and you do not have a stable family situation from
which you have come, this is a health disaster statistically.
You're much more likely to die younger. You're much more
likely to be a smoker.
We talk about increasing the price of cigarettes in order
to discourage people from smoking. We've had some push back--
yes, but this is a very regressive tax.
If the tax on cigarettes goes up, it's the people at the
lower economic level who are paying the tax because they're the
ones who tend to smoke because the education, the family
tradition, the peer pressure, whatever, is not there for them
to stop smoking.
So an increase in tobacco prices, increase in cigarettes,
is a regressive tax on the poor.
I'm sure you've heard that on the House side, too, that
we've heard on the Senate.
It doesn't convince me not to raise the price of
cigarettes, but it's an interesting analysis tool. Dr. Feder,
maybe you and Dr. Manton can get together and look at which
portions, which sectors of the economy are most likely to be
the most expensive.
It may not be completely random in terms of health care.
You say for the 16-year-old who is driving his motorcycle
without a helmet, that's random. But the older you get, it
becomes more predictable in terms of the socio-economic pattern
that people are following coming into those later cohorts, as
well as lifestyles.
Because I think we ought to be looking in terms of where
the pressures are building and whether or not interventions
that we don't normally think of as health interventions,
educational interventions and others, can change lifestyle.
Isn't it true that if you are at the higher economic scale,
you are far more likely to be physically fit?
Dr. Feder. If people have better incomes, they are more
likely to be in better health. You're absolutely right--those
strategies are important, along with education and improving
health and people's quality of life.
But I wouldn't want you to think that you then can
eliminate this variable risk of care needs.
We're all going to get something.
Chairman Bennett. No, I don't think anybody would suggest
that it can be eliminated.
But it can be ameliorated.
Dr. Feder. We can reduce the risk. But then there still is
an unpredictable factor.
I know that you did not mean to characterize all the
younger people with disabilities as motorcycle accidents.
Chairman Bennett. No, no, no.
Dr. Feder. It's just important that we recognize that there
are birth defects.
Chairman Bennett. Yes.
Dr. Feder. There are health conditions, many things. The
fact that 40 percent of the people who need long-term care are
under the age of 65 is something people sometimes forget when
we focus so heavily on the growing elderly population.
Chairman Bennett. I'll turn it over to Mr. Stark now. I've
gone too long and have intruded on his time.
Representative Stark. Thank you, Mr. Chairman.
Is there agreement among the witnesses and generally among
people who do research in this area as to the accuracy and
transparency of the data base?
Do you have all the basic data that you need so that it's
just a question of how you interpret it? Or are there
differences in the basic data that cause some differences in
prediction?
Dr. Fries. I'll try. Probably everybody would like to
comment a little bit on this.
In 1980, that period of time we had almost no data on
quality of life, on morbidity, on disability, on a national
sample basis.
So we have improved that data a great deal.
We still don't measure it very well.
Dr. Manton. On expenditures.
Dr. Fries. We'd find even better results I think if we had
better measures of disability, if we used more quantitative
measures as opposed to on/off measure--you are disabled, you
aren't disabled.
We have ways of doing that. They haven't really crept into
the surveys yet.
So there is a need for more and more data. The need for the
data is particularly on the morbidity side, not the mortality
side, which we count a lot better.
Dr. Manton. I've had a lot of experience in terms of
dealing with the data sets. When we did the 1982 to 1989--1982,
1984, 1989, there's a National Academy of Science panel that
looked at it and said, ``Well, it's potentially credible.'' The
data is OK. But let's have one more round of data to make sure
that there's a trend.
So we did 1994. And the rates went up a little higher. The
rate of improvement went up a little higher.
So at that point, there was a dilemma--hmmm, maybe we'll
have to accept this.
In 1999, they accelerated again. In 1999, the institutional
population experienced an absolute drop.
Now what I'm trying to say there is you need targeted
services to the people that need it, better services for a
smaller portion of the population with the highest needs.
But a simple analysis of the institutional population, the
Census Bureau estimated in 1999 that there's going to be 1.74
million people in nursing home beds. We counted 1.46 million.
That was controversial until the 2000 census came out,
which came out at 1.52 million, and other data sets like the
National Nursing Home Survey----
Representative Stark. Well, when you counted 1.52 or 1.46
million, did anybody dispute your count? There may be disputes
about how you interpret what that is, but what I'm trying to
get at is, when you all are counting people with heart attacks
in a certain age group, do you all pretty much come up with the
same numbers?
Are we working exactly----
Dr. Manton. So far, talking to the individuals and other
researchers involved like Brenda Stillman, if we talk and get
our definitions straight, the numbers are pretty robust.
Representative Stark. OK.
Dr. Fries. There were 16 different trials that were used in
a meta-analysis by Freedman and Martin and every single one of
them showed--not as well documented as Ken's data, but showed
the same thing.
Dr. Feder. Mr. Stark.
Representative Stark. Yes.
Dr. Feder. My colleagues may know better than I, but I
think there are some issues in counting people with functional
impairments. They are partly definitional issues. They are
partly finding the people.
So I think that that's an area where I believe we would all
agree more work is needed.
Representative Stark. OK.
Mr. Lubitz.
Mr. Lubitz. I wanted to mention, if I may.
Representative Stark. Please.
Mr. Lubitz. Three areas where I think that we need to
improve our data on the elderly especially.
One is in getting good national regular estimates of
cognitive status--Alzheimer's. I'm not aware that we have
consistent yearly, good reported data.
We need to get a better handle on our population in
assisted living facilities and facilities that can be
alternatives to either home care or nursing home care.
Dr. Feder. Exactly.
Mr. Lubitz. And that really bears on how we evaluate the
health of the elderly.
The other area is I don't think we have good national
regular data on the mental health or mental illness in our
population, including the elderly population.
Representative Stark. Good point.
Mr. Lubitz. And a methodological issue.
Representative Stark. And that would impact mightily, it
seems to me, both the dementia and the mental health issues.
Mr. Lubitz. Well, especially Alzheimer's.
Dr. Manton. Alzheimer's is a major problem. It gets over-
counted.
There was a GAO study in 1998 that came up with an
estimate, one quarter the size of the estimate from NIA, and
our numbers were consistent with GAO, not with the NIA
estimates, which was based on one study, in 1980, and
extrapolated forward, multiplied times census numbers.
We have a time series over 20 years. Our numbers are
consistent with the European experience and are consistent with
the GAO method analyses.
1.1 million severely cognitively impaired.
Representative Stark. Well, it just occurs to me, Mr.
Chairman, that whatever we could do to see that we get a group
of witnesses like this so that we're all using the same data,
that's something that I'm sure we could begin to have some
impact on now, both its availability and to the extent that we
can standardize it.
So that argument gets off the table and we can get down to
suggesting now, how do you want to take that data?
Mr. Lubitz, I was surprised by the flat curve that you have
for Medicare after about age 73, which I am surprised.
I'm also surprised that there hasn't been--and I don't know
from whence, what period this data comes, that the
pharmaceutical benefit--if you matched it logarithmically with
Medicare, does it follow the same pattern as Medicare, the
pharmaceutical part?
Mr. Lubitz. I really can't answer that.
Representative Stark. OK. Are the veterans programs in your
data?
Mr. Lubitz. That's a very good question. My answer, I
believe, no.
No, they are not.
Representative Stark. I don't know how they might impact.
Dr. Manton. We in the Long-Term Care Survey, Eric Stallard
have been linking in veterans programs, benefits, and long-term
care.
For the 2004 round, we have proposed, but not funded, the
study of the Medicare drug benefit with a follow-on component
of the core survey.
Then also one thing with the survey--it's actually not my
fault or responsibility, but when it was designed in 1980, it
was meant to match up any definition of disability and
functioning that was in demonstration studies being done by the
government.
So you can look at unmet needs. You can look at different
definitions of disability.
You can change the definitions, but the data is there in
order to get a temporal measure and consistently done over the
20-year period.
Then costs we linked to the Medicare files.
Dr. Fries. From the clinical side, a lot of the data that
you've had presented here are consistent with gerontologic
teaching right now which is as you have older patients, you
have fewer moveable, modifiable results and illnesses, and that
at the same time, medications taken are less effective because
there is less organ reserve.
So the counseling is lower, slower, and more conservative.
Perhaps defer the total joint replacement or other procedures.
So you have a well thought-through and well taught approach
toward just a general decrease in the aggression of medical
care for the individual very elderly patient.
Representative Stark. Let me end my part here and toss out
a factoid whose accuracy I won't argue about. But I think in
terms of its approximation, it's not very far off.
That is--and you can do this with several countries. But
the one that hit me, only because I spent a pleasant week in
Costa Rica. But that the average cost per capital for medical
care in Costa Rica is--I'm going to say $500.
The average cost in the United States I'm going to say is,
let's say around $4000.
Whomever I heard this from, I'm pretty sure that those
numbers are in proportion. It says that a child born in Costa
Rica today has the same life expectancy as a child born in the
United States today.
Explain that to me.
Mr. Lubitz. Maybe I can start.
Representative Stark. OK.
Mr. Lubitz. I have a little bit of a family insight because
my wife is Costa Rican.
[Laughter.]
I've thought about your question. And my answer, which is
not based on science but just on many, many trips there, is two
things.
One, they have a good, lean diet.
Two is they don't have as many automobiles per capita. It's
growing now, but they do a lot of walking every day.
Representative Stark. I can understand why. They don't have
any roads.
Mr. Lubitz. Right.
[Laughter.]
They take public transportation. They do a lot of walking.
Third is their medical care system, while certainly not as
technically advanced as ours, is pretty decent and their
national medical school is based on the American model.
Representative Stark. Is it universal?
Mr. Lubitz. It's very good. They do have universal
coverage, although the people complain about long waits, et
cetera.
Dr. Fries. I think the strongest point, just to build on
that, the strongest point of these international comparisons
are that we are clearly not getting very good value at the
margin for the way in which we're currently spending money on
health care.
If it was, and you're correct that we spend 10 times as
much as really impoverished----
Dr. Manton. Relative to the average income, though, is the
question.
Dr. Fries. Well----
Dr. Manton. Adjust out for the base income levels.
Dr. Fries. There's so much that's fixed costs because
machines cost the same even in developing countries as in
developed ones.
So, the fact that we don't see that we in the United States
live 10 years longer or have 10 years' greater health than
other developed nations is a cogent one.
But when you make the international comparisons, you see
that wise resource use and encouragement of that, emulating
some of those low-tech measures, can help us get some health
production that we presently neglect until it gets to be very
expensive.
Representative Stark. Dr. Manton's comment I did hear, is
that there's a difference in income. So I'll ask the staff--
they're going to be mad at you. But I'm going to ask them to
adjust that factoid for me.
Dr. Manton. Because United States is about $35,000. What's
it in Costa Rica?
Mr. Lubitz. I don't know.
Dr. Manton. A tenth, and then we're at $5,000. The relative
expenditure is greater proportion.
Representative Stark. OK. I'll look at that.
Judy.
Dr. Feder. Mr. Stark, just to make a slightly different
point. I think that Jim mentioned it at the beginning of his
remarks.
There is analysis that says that we are getting more value
from the dollar in our health spending than we have typically
thought we are that the investment is producing benefits in
terms of quality-adjusted life-years.
So, one wants to look at that carefully.
That is not to say that we couldn't get that value by
spending less, that we could use our dollars more wisely.
So I don't think we have to believe that we are wasting
money in terms of our investment in improved medical care.
As a user of many new medications, I think we ought to
recognize that value.
But we don't want to spend more than we have to, and I
think that there is widespread agreement that we may be doing
that.
Representative Stark. Thank you.
Dr. Manton. One comment just on the expenditures. Again,
you have to be careful about the base.
But there's a small table in my written testimony where you
compare personal expenditures like 13.9 percent or 14 percent
you figure in the United States of the economy is devoted to
health care.
But when you look at a proportion of government
expenditures, the Japanese and the Swedish are very close to
the United States, within 1 percent, 16\1/2\ versus 17\1/2\
percent.
The point being what's happening in the United States is
more private investment and maybe the U.S. citizen is thinking
more about his health and investing more out of his pocket into
the system and into their health care.
Chairman Bennett. Do expenses for private trainers for
Hollywood stars count as health care expenditures?
[Laughter.]
Dr. Manton. Probably not yet, but they probably should.
Chairman Bennett. Yes.
Dr. Manton. They can help a lot. Especially if you've got
flexibility problems.
[Laughter.]
Chairman Bennett. I won't go any farther than that. But
you're right, that people at the upper end of the economic
scale do spend a lot of money in ways that may or may not be
really productive in terms of better health.
Dr. Manton, Mr. Lubitz has projected that the expenses of
long-term care will essentially wipe out the savings in
Medicare spending as people live longer.
Now, he seems to assume that the current projections of the
need for long-term care and its costs will remain the same.
Is that a reasonable assumption from your point of view?
Dr. Manton. I don't think so. When we did calculations,
taking the 1982 risks of institutionalization or disability and
go forward, if we hadn't had the improvements, we estimated
about $26 billion per year more expenditures in Medicare and of
about $5 billion a year more expenditures in Medicaid. And we
can break that down in a lot of different ways.
The rate of institutionalization and even the absolute
count of the institutional population has declined, and it
could go down a lot further, from 1.74 in 1994 to 1.46 million,
which is an absolute decline.
But, really, that's 1.2 million nursing home beds in
nursing homes. About a quarter-million are in assisted living.
If you look at assisted living, 800,000 or 900,000 people,
only about a quarter of those people need nursing home beds.
I've talked to geriatrician and gerontologists who say that
the same thing could be done to nursing homes, that you could
reduce the population by 60 to 70 percent from the 1.2 million.
So there are a lot of improvements still to squeeze out.
Chairman Bennett. How do you reduce the population in
nursing homes again by 60 percent?
That gets our attention all the way across.
Dr. Manton. OK. Look at the assisted living population.
That's where you have graded care. That's where you can move
back and forth with rehabilitation, into a nursing home bed and
out of a nursing home bed.
So that's the very elderly population who's moved out of
their home or an apartment into a place where there are nursing
home beds available. And you have spousal care usually
available.
What is the rate of utilization in nursing home beds in an
assisted-living facility? It's about 25 percent.
So I've asked people. I said, in the average nursing home
population, true nursing home, classical nursing home,
especially with giving the pressure toward rehabilitation post-
acute care since the 1988 MCCA--Medicare Catastrophic Care
Act--that you could probably do the same with classical nursing
home beds.
Dr. Feder. Mr. Chairman.
Chairman Bennett. Yes.
Dr. Feder. I didn't mean to interrupt you, Ken.
Dr. Manton. Yes.
Dr. Feder. This is an area where I think there is some
dispute in the analysis.
Going back to the decline in the nursing home population, I
think that researchers have raised questions about whether we
really know what's happened to those people--the ones that
aren't in nursing homes. Are they in assisted living
facilities? Are they getting adequate home care?
It's not at all clear.
My understanding of the data on who is in assisted living
is that that population tends to look quite different from the
nursing home population. Although there are individuals who
could move from one to the other, to think of a wholesale
movement to a less costly level of care is probably unlikely;
particularly since the kinds of people using nursing homes are
increasingly disabled, so that they really need the kind of
intensive care that they're getting in nursing homes.
So finally, I guess the other piece is, and that was meant
to be the thrust certainly of my oral presentation, we have to
look at all of this against, to put it simply, what a lousy job
we're doing in taking care of people today.
Home care is barely available for people who need long-term
care. They may not be in nursing homes, but they may be at home
putting enormous burdens on family care-givers, or going with
unmet need, as I indicated earlier.
As your question indicated, to think that we could make
enormous differences or make enormous cuts in what we're
currently spending, which I don't think we've meant to imply,
would be unlikely, would be wrong.
Chairman Bennett. Yes.
Dr. Fries. There are a lot of nuances here and we need to
move toward dynamic models and away from static models because
that's where you add and subtract here.
If you just imagine a situation in which two spouses are
both vigorous in their middle 80's and living together, their
opportunity to live independently is greatly enhanced compared
with the traditional widow living alone without a family
support system.
So there are some things which I would argue can be
encouraged that are good for the pocketbook and they're also
very good for the people who are living and growing older at
the same time.
So I think we need to look for sort of natural trends which
may in a nuanced way come in.
The other thing that I keep talking about in dynamic
modeling, and Ken and I have talked over the years about
dynamic modeling of compression of morbidity, it doesn't have
to happen.
You can do a ``Russian approach'' on health and have
everything get worse over time.
We've had pretty steady progress. But that doesn't have to
happen. If we don't work to postpone illness through good
health policy across the society, then we'll have more illness
than if we do work to postpone illness.
So we haven't done that yet. A lot of what we're going to
see in the results when we look back 10 and 15 years from now
is how we executed with response to now understanding the
problem and some of the solutions to the problem better.
We need to work on that now.
Chairman Bennett. Yes, Mr. Lubitz?
Mr. Lubitz. Yes. I wanted to mention some points for
caution about projecting to the future and these optimistic
things that we hope for.
One is that there is some scientific debate about the
extent to which the disability drops among the elderly are due
to fundamentally better health, or to use of equipment.
One of our colleagues, Brenda Stillman, has a recent paper
raising this question.
Dr. Manton. I've talked to her recently about that paper.
I have a comment.
[Laughter.]
Mr. Lubitz. The other thing is that I wanted to just
mention two things, one that is happening today and one that
began to happen in the 1950's, which were big fundamental
changes in the health of our population that nobody predicted,
and it's a lesson to us that it is very hard to predict the
future.
The first thing that began to happen in the 1950's was a
dramatic drop in the death rate from cardio-vascular diseases.
I don't think people predicted it and people are still
trying to understand the reasons behind it.
The other thing that nobody predicted that's happening
today is the obesity epidemic. It's been going on for two
decades, but in the 1970's, I never read anything that people
said that such an epidemic was coming.
So we are going to have soon, the first--I mean, in a
number of years, the first decade of people, the first large
group of people who have been fat since age 35 entering on to
Medicare.
I don't know what it will mean.
Dr. Manton. The biggest problem----
Chairman Bennett. It can't be good.
Dr. Manton. The biggest problem with obesity at later ages,
or nutrition--now Jim can talk about this--if you go into a
nursing home population, you don't see a lot of fat people.
They may have poor body composition and relative to the
lean body mass, they may have a lot of fat. But the problem in
a nursing home is not obesity and being over fat. It's cellular
hydration, dehydration, and the nutrition is not terribly good.
There's a study by Fiatroni in 1994 in the New England
Journal of Medicine where they looked at the effects of weight
training on people to regenerate function. For a lot of studies
it didn't work. But Fiatroni said, ``Hey, maybe if they're
working harder, maybe they need a little more food.''
When you put nutrition together with exercise, they got up
out of chairs, they started walking, and the population was
mean age 87.
So one of the problems that we've had with our survey as
we've gone on in time is the size of the disabled population is
getting so small, to get accurate estimates, we're having to
look at higher level functions over time and to look at greater
psychological mental functioning as well as physical
functioning.
One additional point that I would sort of say, and I can
talk a lot about Brenda Stillman's stuff when we talked over
the phone to get this issue resolved, and there was a problem
using the Census Bureau independent population estimates and we
can go into great detail in that.
But one point of many that I didn't put in my written
testimony was simply one that was the rate of improvement for
people at specific ages in terms of disability against age.
That's a straight 45-degree line up there. What that means
is 95-year-olds are increasing relatively a lot faster in terms
of functional improvement than 70-year-olds are.
Chairman Bennett. The Senate has called a vote and I think
we've probably come to a logical stopping place. So I will
adjourn the hearing.
But I cannot resist sharing an anecdote out of my own
family that I think illustrates what we've been talking about
here.
My Uncle Harold was a very active squash player all his
life. Squashball, racquetball, and so on.
Wherever he went on business trips, he would always put a
3x5 card on the bulletin board to say, ``I'm in the hotel. If
somebody wants a squash game, I'm available.''
On one occasion, he was in Las Vegas and staying at a
private club rather than a casino-type hotel, put the 3x5 card
up, and got a phone call.
Went down to the game with the fellow who answered his
request. And when it was over, Uncle Harold had won the game.
The young man who was his opponent, as they were showering
and dressing after the game, said, ``Mr. Bennett, I just want
to say something.'' He said, ``When you walked in here, I was
very disappointed at the idea that I was going to play a 65-
year-old man, and that this wouldn't be much of a game for
me.''
He said, ``Obviously, I misjudged and you are in wonderful
shape and a wonderful squash player at your age.''
Uncle Harold said, ``Thank you very much. I appreciate
that. By the way, I'm 75.''
[Laughter.]
Uncle Harold died at 99, after a 48-hour illness. He was
living alone in the house that he and his wife had raised eight
children.
He said he was never going to move because he didn't want
to clean out the attic.
[Laughter.]
He drove a Jaguar in the last week of his life. He refused
to let us make a big deal out of his 99th birthday because he
says, 99 is not that big a deal. Let's wait until I'm 100.
He didn't make it to 100. But in terms of the morbidity
compression, in his case it was less than a week. I think the
squash playing probably had a lot to do with it.
If we could get every Medicare recipient to be in that
circumstance, although I must further say, I think genetics had
something to do with it.
My Uncle Harold died at 99. My father didn't make it. He
died at 95 and my mother at 96. I'm reminding the voters of
those two ages when they think I may be too old for another
term in the Senate.
[Laughter.]
With that, the Committee is adjourned.
[Whereupon, at 11:20 a.m., the hearing was adjourned.]
Submissions for the Record
=======================================================================
Prepared Statement of Senator Robert F. Bennett, Chairman,
Joint Economic Committee
Good morning and welcome to our hearing on the changing
demographics of health care. Today we will examine long-term trends in
the health status and health spending levels of elderly Americans.
The two most obvious trends are that we are living longer and
spending more on health care. But the connection between those two
trends is complex, and we need to understand it better. Some might
worry that we are caught on a fiscal treadmill, in which long life
spans beyond age 65 will simply add to the mounting financial burden of
our commitments to fund public entitlement programs like Medicare,
Medicaid, and Social Security. But that view focuses too narrowly on
the sheer duration of life and the potential costs associated with it,
without examining the quality and value of extra years of life.
Even though we hear complaints about our health care system and are
concerned about various indications of unhealthy habits and practices,
there is a growing body of evidence that suggests Americans are not
just living longer, they are also living in better health overall.
Today's hearing will first take a look at what we know about a
possible decline in chronic disability rates among the elderly and what
this trend implies for the future. Then we will explore whether it is
possible to delay the onset of serious illnesses while extending active
life spans, particularly through effective health promotion and disease
prevention strategies. We will examine how by changing the underlying
demand for health care services, instead of just trying to control the
supply of health care, we could affect the future structure and
financing of our public health programs. Finally, we will discuss
whether a longer lifespan, combined with better health can maintain and
enhance the vital treasure of human capital that we need to maintain a
vigorous labor force and strong economic growth in an aging society.
Of course, before we paint too rosy a picture of the future, we
should carefully assess where we have been and where we are now. Today,
we have a panel filled with some of the nation's leading experts in the
field of health care demographics. We hope that they will not only
highlight and interpret the data for us, but that they will also offer
some suggestions about how we could harness the full potential of our
current investments in health care and health promotion.
Dr. Kenneth Manton of the Center for Demographic Studies at Duke
University is noted for his work with the National Long-Term Care
Survey, a study emphasizing remarkable declines in the prevalence of
chronic disability among the elderly in recent decades.
James Lubitz of the National Center for Health Statistics has
examined the connection between increased longevity and health care
spending among the elderly in a number of articles. He suggests that
the effects of longevity on Medicare acute care services and Medicaid
long-term care benefits may run in different directions.
Dr. James Fries of Stanford University first coined the theory of
morbidity compression several decades ago to explain how the onset of
serious disease and chronic disability may be delayed until later in
life so that a larger portion of our life spans are spent in good
health.
Judy Feder is Professor and Dean of Policy Studies at Georgetown
University, and also a senior scholar at Georgetown's Institute of
Health Care Research and Policy. She previously served 3 years as
Principal Deputy Assistant Secretary at the Department of Health and
Human Services and has written extensively about the financing of
Medicare, Medicaid, and long-term care in particular.
______
Prepared Statement of Representative Pete Stark,
Ranking Minority Member
Thank you, Chairman Bennett. I would like to thank the Chairman for
holding this hearing on the important issue of the growing elderly
population, longevity, morbidity, and the implications for our health
care system.
The witnesses joining us today are leading researchers in this
field and I'm looking forward to their testimony. We appreciate being
able to draw on their vast experience and expertise as we grapple with
the myriad public policy issues surrounding our increased longevity.
That we are living longer is certainly good news, but the question
that remains is what will our quality of life be as we age?
Medicare and Medicaid provide health security for the elderly, but
there's no comprehensive national strategy for long-term care. You
can't predictably know when you or a family member might need such
care, and many families cannot shoulder the burden of a long
convalescence or illness.
Most people can't buy cost-effective insurance for long-term care,
and Medicare doesn't cover it. Medicaid does provide this type of
support, but only for the very poor, and the scope and quality of
services varies by state. We have seen cases of married couples
divorcing just so that the very ill or dying person does not leave
their spouse impoverished in order to obtain the care they need. This
is hardly a family friendly policy.
There is a crying need for a sensible strategy that provides
quality and affordable long-term care. Dr. Lubitz points out that as
our longevity improves more financial pressure will be put on an
already stressed Medicaid system, while Medicare will experience only a
little extra pressure. We can't fix this coverage gap through Medicaid.
Dr. Feder points out the obvious need for a federally funded
program, due to the fact that the demands for such care will vary by
State and the ability of their working age population to support their
elderly population. For example, she shows that in California we won't
have nearly as large of a decline in the number of workers supporting
our elderly over the next two decades as you will in Utah.
With the baby boom generation aging, the need for long-term care
will reach a crisis point if we don't act soon. I look forward to
hearing from our witnesses about how we might avoid such a disaster.
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Statement of James Lubitz, Acting Chief, Aging and Chronic Diseases,
Statistics Branch, National Center for Health Statistics Centers for
Disease Control and Prevention, U.S. Department of Health and Human
Services
Good morning Mr. Chairman and members of the Committee. I am James
Lubitz, Acting Chief of the Aging and Chronic Disease Statistics Branch
at the National Center for Health Statistics, Centers for Disease
Control and Prevention. Before coming to CDC I worked for many years in
the research office of the Centers for Medicare and Medicaid Services.
I am pleased to be here today to participate in the hearing on
``Getting Older, Staying Healthier: The Demographics of Health Care.''
I will discuss the highlights of research by myself and colleagues at
CDC, CMS and the Urban Institute on the longitudinal patterns of
medical expenditures from age 65 until death and how they relate to a
broader picture of health and health care use by our elderly
population.
BACKGROUND
The Medicare program is 38 years old. There has been enough time to
follow the experience of cohorts of Medicare enrollees from enrollment
to death and to observe their patterns of health care use as they age.
Today, the nation's health care system has changed dramatically from
what it was at Medicare's beginning in 1966. We have experienced a
growth in health care spending above the overall inflation rate.
Furthermore, medical spending has grown faster for the elderly than for
the under age 65 group (Meara et al., 2004). In 2000, per capita,
inflation-adjusted health care spending for the 65 and older was 8.4
times what it was in 1963; for those under 65 it was 4.6 times what it
was in 1963. Medicare spending alone grew from 0.75 percent of GDP in
1970 to 2.6 percent last year and is predicted to nearly double to more
than 5 percent of GDP by 2020.
Expectations for medical care have changed for the elderly. In the
1970's there was serious discussion of the idea that medical spending
in the aggregate did little good and that we were ``wasting'' a large
percentage of medical expenses for high tech procedures on seriously
ill persons who would die shortly anyway. The idea of setting limits on
health care spending was proposed. In these discussions, the percentage
of Medicare spending for persons in their last year of life was often
exaggerated, and it was commonly believed that 50 or 75 percent of
Medicare spending was for the last year of life.
Today our population has high expectations for medical care and
procedures like cataract removal, coronary revascularization, hip and
knee replacements, and early treatment for heart attacks and strokes to
restore function and reduce disability. Thus, although Medicare
spending has grown and is expected to keep growing, Medicare
beneficiaries may derive greater value from the program through better
health and quality of life. Now there is increasing evidence that
medical care is cost effective in the aggregate, as measured by
treatment costs versus gains in life expectancy and improved health
(Cutler and McClellan, 2001). There is also evidence that the overall
health of the elderly has improved over the past few decades; although
there is not complete agreement on the nature and degree of
improvement. I expect the other witnesses will discuss in detail the
topic of trends in the health of the elderly. The effect of improved
health of the elderly on health spending is a complex subject, with
some experts believing that improved health will lead to lower costs
(Singer and Manton, 1998; Waidman and Liu, 2000). As I will try to make
clear, the relationship between health, health care services and health
care spending is complex, and under equally plausible scenarios better
population health can lead to lower or higher health costs.
The analyses that I present here have been developed from the
administrative and survey data bases of CMS and CDC's NCHS.
MEDICARE COSTS IN THE FINAL YEARS OF LIFE
The Medicare program is unique in that it is the only health
insurance program in which people enroll (at age 65) and are expected
to remain until their death. Consequently, Medicare covers the medical
costs of the final years of life of 75 percent of the U.S. population.
We would expect that Medicare costs in the final years would be higher
than in the prior years, because patients are, in general, very sick
before death and final year costs are high. Costs in the last year of
life account for 28 percent of Medicare costs in a given year. But
because this percentage has held steady for two decades--despite all
the changes in medicine and in the health care delivery system--we can
say that costs in the last year of life have just kept pace with
overall growth in Medicare costs and are not disproportionately
responsible for the Medicare spending increase. There is no evidence
that ``heroic'' efforts to extend life, to whatever extent they occur,
have been driving Medicare cost increases.
Perhaps it should not be surprising that this percentage has been
steady. Physicians are often faced with uncertain prognoses for
severely ill patients. This may limit the scope of changes in the care
of dying patients. Within the last year of life, we find costs
concentrated in the last months--the last 2 months of life account for
over half of the average beneficiary's costs in the final year. And,
again, this percent seems to have held steady.
We have also found that Medicare costs in the last year are lower
for older decedents. Medicare spending in the last year of life for
decedents age 90 or over is only 58 percent of that for decedents age
65-69. This may reflect an inclination on the part of providers toward
less aggressive interventions for the very old in their final years.
But, as we will note below, long-term care costs (of which only a small
part are covered by Medicare), are considerably higher for older
decedents than younger ones.
The high costs of the final years provide an insight into why
Medicare spending per enrollee per year is higher for older than
younger enrollees. To a large extent the difference reflects the higher
death rate of older enrollees and the concomitant end of life costs;
not advanced age, per se. All things being equal, falling death rates
will decrease the annual, per enrollee Medicare costs in each age
group, so the older aged may cost relatively less per capita tomorrow
than today. In other words, it is the number of years before death,
more than chronological age, which drives Medicare spending.
MEDICARE COSTS FROM AGE 65 TO DEATH
The medical care costs for the elderly in any year are made up of
the costs of enrollees at various ages and various times before death.
In any calendar year, some persons will have a life expectancy of many
years; others will be in their final year and likely incurring high
medical costs. The sum of the costs for all these enrollees comprises
annual Medicare spending. We examined cumulative medical costs from age
65 until death for persons dying at each age from 65 to 100 to study
the relationship between longevity past age 65 and total medical care
costs, including both Medicare covered and other costs (Figure 1).
We find that, on average, past age 70 or 75, each additional year
lived adds little to Medicare costs. This is especially true for long-
lived individuals. A person who lived to 90 as compared to 89 cost
Medicare only $404 more (in 1990 dollars), while a person who lived to
70 compared to 69 cost Medicare $3,571 more. The additional years
covered by Medicare for longer lived persons are the years farthest
from death. For any enrollee, whether they die at 80 or 90, Medicare
will pay the high costs of their final illnesses. The added years
covered for the long-lived persons are the relatively healthy, low-cost
years far from the end of life. The farther an enrollee is from the
final year, the less costly they are for Medicare. For instance, the
added years covered for someone dying at age 90, rather than 85 are the
25th to the 21st year before death when the enrollee is likely to be in
good health. The fact, noted earlier, that Medicare end-of-life costs
are lower for older decedents is another reason that long-lived
enrollees do not cost Medicare much more that shorter-lived ones.
COST FROM AGE 65 TO DEATH FOR SERVICES MEDICARE DOES NOT COVER
Up to now I have been discussing only Medicare costs. Now I will
describe patterns of use of all services--both Medicare-covered and
those that Medicare doesn't cover. As you know, Medicare on average
pays about 55 percent of the health care costs of persons 65 and over.
The rest is paid out-of-pocket by beneficiaries and their families, by
Medicaid and other public programs, and by private supplementary
insurance plans. Principal services not covered are nursing home care
other than the specific Skilled Nursing Facility Benefit, most
outpatient prescription drugs (though, of course, the New Medicare drug
benefit will start in 2006), and home health care not eligible for
Medicare reimbursement.
We saw that Medicare costs in the final years of life are
considerably lower for older decedents. However, this is not the case
for non-covered services. Nursing home expenses in the last 2 years of
life are much higher for older decedents compared to younger ones. The
nursing home expenses of persons dying at 90 are, on average about five
times higher than that of persons dying at 70. In fact, from age 90 on,
average per capita expenses in the final 2 years of life for nursing
home care exceed the average per capita Medicare expenses in the final
2 years of life for all covered services combined, highlighting the
high cost of long-term care for our oldest old. Although concern about
costs in the final year of life has focused on the appropriateness of
expensive, high tech care, long-term care costs are, in fact, of more
importance for the oldest old.
The effect of longevity on total health spending is different from
the effect on just Medicare spending. Because long-term care costs
accelerate with age, they offset the considerably lower Medicare costs
in the final years for older decedents. An added year of life from age
90 to 91 adds about the same amount to cumulative health care costs
from 65 to death as an added year from age 70 to 71 (Figure 1). This
illustrates the different effects age and demographic factors can have
on total health spending as compared to just Medicare spending.
Over the next decades, our Nation will experience major demographic
changes. They include a large growth in the number of persons age 65
and over as the baby boomers reach retirement age and increased life
expectancy after age 65. We isolated the possible effects of these
changes on both Medicare spending and overall health spending for
elderly persons. The three specific demographic factors we considered
were, (1) the increase in the numbers of persons born in 1955, who will
turn 65 in 2020, as compared with the number born in 1925, who turned
65 in 1990, (2) the better survival from birth to age 65 of the 1955
birth cohort as compared to the 1925 birth cohort, and (3) increased
life expectancy at age 65 for the 1955 cohort.
I need to make clear that the purpose of the simulations is only to
isolate the effect on health spending of likely demographic changes. We
do not account for possible medical advances, changes in patterns of
utilization, disease or disability or, importantly, changes in Medicare
or Medicaid rules about payment, benefits and eligibility.
First, we consider the effects of these changes on just Medicare.
We find that of the 88 percent greater spending (in constant dollars)
from age 65 to death for the cohort who turn 65 in 2020, by far the
most important demographic factor behind that increase was the greater
number of persons in the 1955 birth cohort (baby boomers who will turn
65 in 2020). The 1955 birth cohort was 58 percent larger than the 1925
birth cohort. The second most important factor was the improved
survival from birth to age 65 of the later cohort. In the 1925 birth
cohort, 69 percent survived to age 65; in the 1955 cohort an estimated
80 percent will survive to 65. The greater expected life span past age
65 of 1.4 years for the 1955 birth cohort was a minor factor in the
increase.
To put the findings in quantitative terms; 74 percent of the
greater Medicare spending (in constant dollars) for the baby boomers
born in 1955 will be the result of a larger birth cohort, 23 percent
will be due to a lower death rate from birth to age 65, and only 3
percent will be the result of longer life past 65. This reflects the
finding noted earlier; given that Medicare covers the expensive final
years of life, living to 90 as compared with 85 does not add that much
in Medicare costs.
The findings are somewhat different when we consider overall health
care spending, not just spending for what Medicare covers. The larger
birth cohort is still by far the most important reason for increased
total health care costs for the baby boomers once they become seniors,
followed by better survival from birth to 65. But, because of its
effect on long-term care costs, longer life expectancy at age 65 has a
larger effect on long-term care costs than on Medicare costs. For
example, the 3 percent increase in life expectancy at 65 for the cohort
turning 65 in 2015 compared with those turning 65 in 2000 was
responsible for a 1 percent increase in Medicare costs, but a 6 percent
increase in nursing home costs.
EXPECTED SPENDING FOR PERSONS IN GOOD HEALTH VERSUS POOR HEALTH
Because the health of the elderly has been improving, as measured
by improved life expectancy and functional status, it is of interest to
compare the cumulative health care costs from 70 to death for healthy
versus less healthy persons. We simulated total medical spending from
age 70 to death by health status, as measured by both self-reported
functional status and self-reported health status (from excellent to
poor). Functional status measures the ability to perform a variety of
activities and tasks, like climbing stairs; managing daily tasks, like
housecleaning and meal preparation, and self-care activities, like
bathing and dressing.
No matter what measure we used, we found that as expected, persons
reporting better health at age 70 lived longer than persons in worse
health. Furthermore, they spend most of their longer life span past age
70 in excellent or good health, while persons reporting poor health at
age 70 lived only two thirds as long and spent most of that time in
fair or poor health.
We found that the total, cumulative medical spending from age 70
until death was similar for persons in good health at 70 versus those
in poor health at 70. This was so even though the healthier persons had
more years to accumulate costs. This was also true whether we looked at
just Medicare spending or at total health care spending. Better health,
which produces lower yearly costs, offsets the effect of more years to
accumulate costs.
IMPLICATIONS
If we imagine a situation in which the number of persons turning 65
and coming onto Medicare is constant, then increases in life expectancy
past age 65 would not have a large effect on the Medicare budget under
current patterns of health care spending (although the effect on
Medicaid would likely be greater because of Medicaid's large role in
paying for long-term care costs for the elderly). Increases in life
expectancy can result from a mixture of better life styles (e.g. diet,
exercise) and use of preventive and screening services, and from
medical advances, which can mean both more efficient, money-saving
treatments as well as innovative, costly new treatments. The extent of
influence of each is unclear. A good example of how the role of these
factors may change is the decline in mortality from cardiovascular
diseases, which began in the 1950's. At the beginning the drop in
mortality was attributed largely to improved life styles--less smoking,
etc. Currently, however, experts attribute the continuation of the
downward trend as much to new medical interventions as to improved life
styles (Hunink et al. 1997).
Life style improvements generally come at low cost to the medical
care delivery system because they result from behavior change prompted
by public education. And, of course, the costs of health promotion
efforts in the pre-Medicare years are not borne by the Medicare
program. There is evidence from some epidemiologists that a favorable
health risk profile in middle age may result in both longer life and
lower than average Medicare costs (Daviglus et al. 2003; Lui et al.
2003). These researchers also find, interestingly, that Medicare costs
in the last year of life are lower for persons with favorable risk
profiles in middle age.
Today, it is not clear what the health of the future elderly will
be. Favorable trends in reduced smoking, better control of hypertension
and lower cholesterol compete with an alarming increase in the percent
of persons in all age groups who are overweight or obese. This includes
increases for those middle-aged baby boomers who will begin to enter
Medicare in 2011, just 7 years from now.
Health improvements also result from expensive interventions. For
example, the numbers of coronary artery bypass surgeries and coronary
angioplasties, two procedures developed after the establishment of
Medicare have greatly increased. Originally, they tended to be
performed on the middle-aged and younger elderly. Now, as experience
has grown among providers and techniques have improved, these heart
procedures are frequently performed on the older aged. This example
points out the difficulty of predicting future developments. It is
difficult to predict whether improved health and life expectancy will
result more from expensive interventions for the elderly or from better
health in the middle aged, pre-Medicare group. It is possible to
simulate the effects of various future scenarios, but not to predict
the future, except, of course, for the certainty of a large increase in
the number and percent of the U.S. population over age 65.
Under current patterns, greater longevity will increase the need
for, and spending on, long-term care. And in contrast to acute care,
long-term care is paid mostly by Medicaid and out of pocket by patients
and families. Thus, longevity improvements may very well have different
effects on Medicare and Medicaid--putting little extra pressure on
Medicare but more on Medicaid. It may also increase the financial and
care giving burdens on patients and families. There may be a
concomitant movement from informal care to formal paid care because in
the future there will be fewer working age persons in relation to the
elderly. This would increase the direct costs of long-term care. This
pessimistic picture assumes that the same age related patterns of
frailty and cognitive loss that we see today will persist into the
future. We do not know, however, if this will be the case. The
compression of morbidity hypothesis posits that the amount of time in
poor health will be less among the future elderly than among today's
elderly. If morbidity is indeed becoming compressed, medical costs
should be affected--possibly reducing them if the number of months in
poor health declines (or increasing them if the improvement comes from
expensive medical procedures). We plan to pursue this topic in future
studies.
I thank you for your attention and look forward to answering any
questions you may have.
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Statement of Judith Feder, Ph.D., Professor and Dean,
Georgetown Public Policy Institute, Georgetown University
Mr. Chairman, members of the Committee, I'm pleased to have the
opportunity to testify before you today on future policy toward the
growing elderly population. My focus will be on long-term care--
specifically, on the implications of growing numbers of elderly for
public policy toward long-term care financing. My testimony will
reflect more than twenty-five years of research experience in long-term
care, at Georgetown University and, before that, the Urban Institute.
Based on that research, my policy conclusions are the following:
In contrast to policies toward income and. health security
(Social Security and Medicare), the Nation lacks a policy that assures
people of all ages access to quality long-term care when they need it,
without risk of impoverishment.
The need for long-term care is unpredictable and, when
extensive service is required, financially catastrophic--best dealt
with through insurance, rather than personal savings. But neither
Medicare nor private insurance provides that insurance protection.
The Federal-State Medicaid program provides invaluable
support to those who need long-term care, but only when and if they're
impoverished. Its protections vary substantially across states, and, in
most states, fail to assure access to quality care, especially in
people's homes.
A much larger elderly population--the aging of the baby
boom--is likely to substantially increase the numbers of people who
need long-term care, even if the proportion of elderly who need it
declines. The result will be greater demand on an already significantly
stressed Medicaid program, squeezing out states' ability to meet other
needs and, at the same time, likely reducing equity and adequacy across
states.
Although private insurance and certainly private resources
can contribute to financing, long-term care security--throughout the
nation--requires new Federal policy and a significant investment of
Federal funds.
The following will lay out inadequacies in current long-term care
financing; the implications of growth in the elderly population for
future inadequacies; and the importance of Federal policy to sustain
and improve long-term care protection. Unless otherwise noted, I am
drawing on research from the Georgetown Long-term Care Financing
Project, funded by the Robert Wood Johnson Foundation, and available at
our web site: ltc.georgetown.edu. The opinions I present are, of
course, only my own.
People who need extensive assistance with basic tasks of living
(like bathing, dressing and eating) face the risk of catastrophic costs
and inadequate care. Today, almost 10 million people of all ages need
long-term care. Only 1.6 million are in nursing homes. Most people
needing long-term, especially younger people, live in the community.
Among people not in nursing homes, fully three quarters rely solely on
family and friends to provide the assistance they require. The range of
needs in considerable--with some people requiring only occasional
assistance and others needing a great deal. Intensive family care-
giving comes at considerable cost--in employment, health status and
quality of life--and may fail to meet care needs. Nationally, one in
five people with long-term care needs who are not in nursing homes
report ``unmet'' need, frequently resulting in significant
consequences--falling, soiling oneself, or, inability to bathe or eat.
The cost of paid care exceeds most families' ability to pay. In 2002,
the average annual cost of nursing home care exceeded $50,000 and 4
hours per day of home care over a year were estimated to cost $26,000.
Clearly, the need for extensive paid long-term care constitutes a
catastrophic expense.
The likelihood of needing long-term care is also unpredictable.
Although the likelihood increases with age, close to 40 percent of
people with long-term care needs are under the age of 65. And the need
for care among the elderly varies considerably. Over a lifetime,
projections of people currently retiring indicate that 30 percent are
likely to die without ever needing long-term care; fewer than 10
percent are likely to need less than a year of care, and about 20
percent are likely to need care for 5 years or more.
Given the reality that long-term care is an unpredictable need for
a potentially catastrophic expense, insurance makes sense. Reliance on
savings alone is inefficient and ineffective. People will either save
too much or too little to cover expenses. But few people have adequate
long-term care insurance. Although sales of private long-term care
insurance are growing (the number of policies ever sold more than
tripled over the 1990's), only about 6 million people are estimated to
currently hold any type of private long-term care insurance. Although
there is potential for substantial expansion of that market, private
long-term care insurance policies offer a limited means to spread long-
term care risk: they are not available to those who already have long-
term care needs; are not even advocated as a means of protecting young
people against the risk of disability; offer benefits limited to fixed
dollar amounts rather than to the cost of needed services; and are
acknowledged to be unaffordable or insufficient to protect the
substantial. segment of elderly persons, now and in the future, with
low and modest incomes. We need only look at experience in health
insurance to recognize that reliance on the individual market--plagued
by risk selection, high marketing costs, benefit exclusions, and other
problems--for long-term care will be grossly inadequate to assure
adequate protection.
Current public policy also falls far short of assuring insurance
protection. Medicare, which provides health insurance to many who need
long-term care, covers very little long-term care. Its financing for
nursing home care and home care is closely tied to the need for acute
care and is available for personal care only if skilled services--like
nursing and rehabilitation therapy--are also required. It is Medicaid
that provides the nation's long-term care safety net. But Medicaid
protections differ considerably from what we think of as ``insurance''.
Medicaid provides invaluable coverage of long-term care expenses, but
only after people have exhausted virtually all of their own resources.
As a result, Medicaid does not protect against financial catastrophe;
it finances services only after catastrophe strikes.
Further, Medicaid's benefits focus overwhelmingly on nursing home
care--an important service for some, but not the home care services
preferred by people of all ages. In the last decade, Medicaid home care
spending has increased from 14 percent to 29 percent of Medicaid's
total long-term care spending. But nursing homes still absorb the
lion's share of Medicaid's support for long-term care.
Medicaid protection also varies considerably from State to state.
As a Federal-State matching program, Medicaid gives states the primary
role in defining the scope of eligibility and benefits. A recent Urban
Institute analysis emphasized the resulting variation across states in
service availability as a source of both inequity and inadequacy in our
financing system. In an examination of 1998 spending in 13 states,
long-term care dollars per` aged, blind, or disabled enrollee in the
highest spending states (New York and Minnesota) were more than 4 times
greater than in the lowest (Alabama, Mississippi)--a differential even
greater than that found for Medicaid's health insurance spending for
low-income people.
Both our own research and that conducted by the General Accounting
Office (now the Government Accountability Office) tells us that
differences in State policies have enormous consequences for people who
need long-term care. Studies comparing access for individuals with very
similar needs in different communities show that people served in one
community get little or no service in another. Georgetown research
finds that the same person found financially eligible or sufficiently
impaired to receive Medicaid services in one State might not be
eligible for Medicaid in another--and, if found eligible, might receive
a very different mix or frequency of service. And research (in
progress) comparing use of paid services in 6 states finds almost twice
the incidence of unmet need (56 percent) in the State with the smallest
share of people likely to receive paid services as in the State with
the largest (31 percent).
This variation--as well as ups and downs in the availability of
benefits over time--undoubtedly reflects variation in states'
willingness and ability to finance costly long-term care services. The
recent recession demonstrated the impact on states of changes in their
economies and the vulnerability of Medicaid recipients to states'
reactions. In 2001, Medicaid accounted for 15 percent of State
spending, with long-term care responsible for 35 percent of the total.
Virtually all states were cutting their Medicaid spending as budget
pressures struck, endangering access either for low-income people
needing health insurance, older or disabled people needing long-term
care, or both.
In sum, under current policy, neither public nor private insurance
protects people against the risk of long-term care. Despite Medicaid's
important role as a safety net, the overall result for people who need
care is catastrophic expenses, limited access to service, and care
needs going unmet.
Given inequities and inadequacies in our current approach for long-
term care, it is no wonder that we are concerned about the future, when
a far larger proportion of the nation's population will be over age 65
than are today. Experts disagree on whether disability rates among
older people in the future will be the same as or lower than they are
today. But even if the proportion of older people with disabilities
declines, the larger number of older people will likely mean a larger
number of older people will need long-term care in the future than need
it today. The population aged 85 and older, who are most likely to have
long-term care needs, will double by 2030 and quadruple by 2050.
States will vary in the aging of their populations--with resulting
differences in the demand for long-term are and the ability of their
working-aged population to support it. To identify future demands on
Medicaid, forthcoming Georgetown analysis presents census data on the
ratio of elderly people to working-age adults between 2002 and 2025.
Nationally, this ratio changes from about one to five (one person over
age 65 for every 5.2 people of working age) in 2002 to one to three--an
increase of about 66 percent. But the changes differ across states,
with some states well below the national average (e.g. California,
Connecticut, D.C., Massachusetts) and others, far above. In many
states, the ratio increases by more than three quarters and in a few
(e.g. Colorado, Utah, and Oregon), it more than doubles. All states
will be challenged to meet increased long-term care needs.
States are already struggling with Medicaid's fiscal demands, which
challenge their ability to meet equally pressing needs in education and
other areas. And State revenue capacity varies considerably. If current
policies persist, pressure to make difficult tradeoffs will only get
stronger. In the future, states with bigger increases in the elderly-
to-worker ratio will face the greatest pressure. And, since many of the
states with the most dramatic changes are currently spending the least
on Medicaid long-term care, there is a strong likelihood that in the
future, long-term care financing will be even less equitable and less
adequate across the Nation than it is today.
What's needed for a different future is public policy action.
Essentially, the Nation faces a choice: do we want to live in a society
in which we assure access to affordable quality long-term care for
people who need it or in a society in which we leave people in need to
manage as best they can on their own? A recent CBO report emphasizes
the latter approach--a combination of cutbacks in already inadequate
Medicaid protection aimed essentially at forcing people to purchase
private insurance and tax preferences to reduce the costs--and thereby
promote the purchase--of private long-term care insurance. In my view,
Medicaid cuts constitute cruel and unusual punishment for people truly
unable to cope by themselves. Some people simply cannot afford
insurance. And, as CBO recognizes, given the limited benefits of
private long-term care insurance (relative to the potential cost of
care), even those who purchase insurance may face catastrophic costs.
Further, proposed tax preferences clearly favor the better off over
those in greatest need. Experience with health insurance tells us that
such credits are likely to primarily benefit those who would have
purchased long-term care insurance even in the absence of credits--
substituting public for private dollars--and, as currently proposed,
are not even designed to reach the substantial portion of older and
younger Americans with low and modest incomes.
The right way to address both current and future long-term care
needs requires a commitment of public resources--and, to be adequate
and effective in all states--Federal resources. Expanded public
financing for long-term care could take a variety of forms and by no
means need eliminate private contributions. One option, modeled on
Social Security, would be to provide everyone access to a ``basic'' or
``limited'' long-term care benefit, supplemented by private insurance
purchases for the better-off and enhanced public protection for the
low-income population. Another option would be establishment of a
public ``floor'' of asset protection--a national program assuring
everyone access to affordable quality long-term care--at home as well
as in the nursing home--without having to give up all their life
savings as Medicaid requires today. The asset floor could be set to
allow people who worked hard all their lives to keep their homes and
modest assets, while allowing the better off to purchase private long-
term care insurance to protect greater assets. Either public/private
combination could not only better protect people in need; it could also
provide substantial relief to states to focus on health insurance,
education and other pressing needs--relief that Governors have
explicitly requested by calling on the Federal Government to bear the
costs of Medicare/Medicaid ``dual eligibles''. My highest priority for
expenditure of the next Federal dollar would be responding to this call
(along with supporting more home care and better quality care) with
more Federal dollars to Medicaid.
Some will undoubtedly characterize proposals like these as
``unaffordable'', given the fiscal demands of Medicare and Social
Security and the current Federal budget deficit. But that deficit
reflects policy choices. And I would far rather see expenditure of the
next Federal dollar devoted to enhanced Medicaid long-term care
financing than to tax credits for long-term care or tax cuts in
general. Indeed, the estate tax is especially appropriate for long-term
care financing: taxing everyone's estate at certain levels, to provide
reasonable estate protection for those unlucky enough to need long-term
care.
As we look to the future, examination of the choices being made by
other nations of the world is instructive. Analysis by the Organization
for Economic Cooperation and Development (OECD) of long-term care
policy in 19 OECD countries (presented at the June research meeting of
AcademyHealth) found that the number of countries with universal public
protection for long-term care (Germany, Japan and others) is growing.
Public protection, they report, does not imply the absence of private
obligations (cost sharing and out-of-pocket spending), nor does it
imply unlimited service or exploding costs. Rather, in general, it
reflects a ``fairer'' balance between public and private financing--
relating personal contributions to ability to pay and targeting
benefits to the population in greatest need. Many of these nations have
substantially larger proportions of elderly than the U.S. does today
and therefore can be instructive to us as we adjust to an aging
society.
Clearly, we will face choices in that adjustment. If we are to be
the caring society I believe we wish ourselves to be, we too will move
in the direction of greater risk-sharing and equity by adopting the
national policy and committing the Federal resources which that will
require.