Health Care Expenditures. Definitions: GNP vs. GDP. More terms: CPI, PPI, MPI

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Caitlin Leonard
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1 Health Care Expenditures Objectives 1.Understand the definition and purpose of the gross national product (GNP), gross domestic product (GDP), consumer price index (CPI), and producer price index (PPI). 2.Recognize both the magnitude of and trends in annual national health care expenditures, per capita health care spending, and percentage of GDP spent on health care. 3.Cite and explain the four major factors responsible for rises in health care expenditures. 4.Compare price indexes (including relative changes over time) for selected health care goods and services. 5.Explain the concept of health care spending "burden" and describe how this "burden" changed between 1965 and 1991 for business, households, and government. 6.Recall the percentage of national health care expenditures accounted for by primary sources of payment. 7.Recall the percentage of national personal health care expenditures accounted for by selected types of goods/services. 8.Compare the United States with other developed nations in terms of health care spending and health status. Definitions: GNP vs. GDP Gross National Product (GNP): the market value of goods and services produced by labor and property supplied by legal residents of the economy over a given year Gross Domestic Product (GDP): Current market value of goods and services produced by labor and property located in the economy over a given year What s the difference: GDP vs. GNP??? A lot of people will use these terms interchangeably!!! GNP = GDP + U.S. labor or capital located outside the states foreignowned labor or capital located in the states What s the difference: GDP vs. GNP??? GNP = everything the U.S. produces in the world GDP = everything produced inside the U.S. Better for showing short-term trends in the economy Most often used to compare U.S. to other countries More terms: CPI, PPI, MPI Consumer Price Index (CPI): Measures changes in the prices of goods purchased by the typical urban family of 4 Medical Price Index (MPI): Sub-index of CPI, looking at the medical field Producer Price Index (PPI): Measures changes in the prices for a manufacturer 1

Recognize both the magnitude of and trends in annual national health care expenditures, per capita health care spending, and percentage of GDP spent on health care. 3.

2 More about CPI Government surveys households to determine what is purchased during a given base period Records purchases and their prices For the base period, these purchases are called a basket of goods More about CPI In the future, the price to purchase the same basket of goods is computed CPI is the ratio of new price to the original price x 1 Example of computing CPI Basket of goods = Pizza and Tums In 25: bought 8 pizzas at $1 each and 1 bottles of Tums at $7 each In 26: bought 8 pizzas at $12 each and 1 bottles of Tums at $6 each CPI = ($12 x 8) + ($6 x 1) x 1 =14. ($1 x 8) + ($7 x 1) Prices have increased about 4% in the last year Health Care Expenditures - U.S Total Expenditures Doubled from Per Capita People live longer today better health, but longer care! $ (Billions) Health Care Expenditures - U.S Per Capita Spending 1929: $29 billion 2: $6,28 billion $7, $6, $5, $4, $3, $2, $1, $ Health Care Expenditures U.S. population Gross Domestic Product NHE % GDP Change 196 Health Care Inflation > Economy Inflation : 3.5% change in NHE GDP 2: 16% change in NHE GDP % Change 2

and Tums In 25: bought 8 pizzas at $1 each and 1 bottles of Tums at $7 each In 26: bought 8 pizzas at $12 each and 1 bottles of Tums at $6 each CPI = ($12 x 8) + ($6 x 1) x 1 =14.

3 Health Care Expenditures 196s: government becomes a payor Medicare and Medicaid begins! Major jumps in % GDP Health Care Inflation Occurs at higher rate than overall economy Disproportionate Also growing at a faster rate Health Care Expenditures Most recent data: 28-> 232 Billion total HCE $7538 per capita 16% GDP Projections: Perhaps slowing slightly Still will be disproportionate Estimated to increase to 18.4% of GDP in 213 Heffler, et al. Trends: Health Spending Projections Through 213: growth is projected to slow in 23 after six consecutive years of acceleration. Health Affairs [serial online]. 11 Feb 24: Heffler, et al. Trends: Health Spending Projections Through 213: growth is projected to slow in 23 after six consecutive years of acceleration. Health Affairs [serial online]. 11 Feb 24: Health Care Inflation A study in the late 9 s broke down HC inflation by what were the sources of increases Found four major factors Health Care Inflation Heffler, et al. Trends: Health Spending Projections Through 213: growth is projected to slow in 23 after six consecutive years of acceleration. Health Affairs [serial online]. 11 Feb 24: The 4 Major Factors From : Health Care Expenditures up by 6.8% Population up by 13% Inflation (in general) up by 36% Excess health care inflation up by 21% Increased utilization/intensity of services up by 3% These 4 factors are consistent! Health Care Expenditures Inflation Population Increases Health Care Inflation Utilization % 57% 6% 3% 27% % 38% 1% 22% 3% % 36% 13% 21% 3% 3

HCE $7538 per capita 16% GDP Projections: Perhaps slowing slightly Still will be disproportionate Estimated to increase to 18.4% of GDP in 213 Heffler, et al.

4 4 Factors Things we can t do much about: Population Increases General Inflation However, we can do something about: Health care inflation (ours is much higher than other countries) Health care utilization (who s paying for all that use?) Compare and contrast price indexes (including changes over time) for selected health care goods and services CPI of Various Items Average CPI Food and Beverage Transportation Medical Care Personal Care CPI Breakdown of Medical Items Average CPI Physicians Rx Drugs OTC Drugs Hospital Services Rx Drugs: Large Jump in 198s Hospital Services Medical care has increased at a greater rate than other items (and CPI!) Hospital services are a major contributor to high costs Rx drugs are a close second now! Bureau of Labor Statistics, Bureau of Labor Statistics, Understand and be able to explain: the concept of health care spending burden how health care spending changed between 1965 and 1981 for businesses, households, and gov t The Burden Has income or revenue kept in pace with health care expenditures? If so, not a big issue If not, this the burden of HC costs to increase- May force a choice between meeting other needs and getting the health care needed/ desired 4

) Compare and contrast price indexes (including changes over time) for selected health care goods and services 35 3 25 2 15 1 5 CPI of Various Items Average CPI Food and Beverage Transportation

5 Burden on Payors: Health Care Spending as a % of Business salaries/wages Business after-tax profits Household income Federal gov t revenues State and local gov t revenues Household income: burden not changed much at all Increased A LOT for businesses and gov t AND, both of these want reforms! Spending a lot of money Recall the % of national health care expenditures accounted for by the primary sources of payment Private Health Insurance Health spending per privately insured American increased 7.4% in 23 Premiums per enrollee increased 1.4% in 23 3rd consecutive year of double-digit growth Some suggestion premiums are increasing at a greater rate than costs Private Health Insurance Growth in employer-sponsored health insurance premiums increased 12% in 24 Health insurance is increasingly difficult to afford Increased patient cost sharing Employers shifting costs to employees Premiums also growing at a higher rate Benefit structures may change to encourage patients to use efficient providers or choose more effective therapies Strunk, Ginsburg. Tracking Health Care Costs: Trends Turn Downward in 23. Center for Studying Health Change. 24 June: 1-3. Heffler, et al. Trends: Health Spending Projections Through 213: growth is projected to slow in 23 after six consecutive years of acceleration. Health Affairs [serial online]. 11 Feb 24: % change from previous year in NHE by payor % NHE Private Public PERCENTAGE OF PERSONAL HEALTH CARE PAYMENTS Direct/out-of-pocket payments Third-party payments, total Private insurance Government Other Direct out of pocket has steadily dropped Government biggest payor by far

4 Household income: burden not changed much at all Increased A LOT for businesses and gov t AND, both of these want reforms! Spending a lot of money 95 9 5.3 8 5.

6 A word about Medicare Medicare Part D Will see increased government spending over previous years Perhaps similar to what happened in the 6 s when Medicare and Medicaid began Heffler, et al. Trends: Health Spending Projections Through 213: growth is projected to slow in 23 after six consecutive years of acceleration. Health Affairs [serial online]. 11 Feb 24:

13.8% Inflation-adjusted GDP (billions) Cumulative growth 2009 to Q3 2015. Exhibit 1 Steady U.S. Economic Growth After a Severe Recession $17,000

13.8% Inflation-adjusted GDP (billions) Cumulative growth 2009 to Q3 2015. Exhibit 1 Steady U.S. Economic Growth After a Severe Recession $17,000 Exhibit 1 Steady U.S. Economic Growth After a Severe Recession Inflation-adjusted GDP (billions) $17,000 $16,000 $15,000 $14,000 $13,000 13.8% Cumulative growth 2009 to Q3 2015 $12,000 $11,000 $10,000