What are the NHEA?

1. National Health Expenditure Accounts (NHEA)Stephen HefflerDirector, National Health Statistics GroupOffice of the ActuaryNational Economic Accounts Data Users’ ConferenceApril 13, 2007

2. What are the NHEA? The National Health Expenditure Accounts (NHEA) are a system of production-based accounts that estimate total U.S. health care spending by type of service/good consumed, by who funds and sponsors this care, by which age group receives this care, and by which states’ residents consume and which states’ providers provide this care. • The NHEA are: • Comprehensive • Multidimensional • Consistent over time http://www.cms.hhs.gov/NationalHealthExpendData/01_Overview.asp

3. What is NHE? The National Health Expenditures (NHE) represent the total amount spent in the U.S. to purchase health care goods and services during the year as well as the amount invested in the medical sector to produce health care services in the future. • Medical services on NAICS basis • Medical goods on product-line basis • Sources of Funding by Private (out-of-pocket, private insurance, other) and Public (Federal and State and Local) • Sponsors (Households, Businesses, Governments)

4. Personal Consumption Expenditures Durable goods Nondurable goods Services Gross private domestic investment Fixed investment Nonresidential Structures Equipment and software Residential Change in private inventories Net exports of goods and services Exports Imports Government consumption expenditures and gross investment Federal Defense Nondefense State and local GROSS DOMESTIC PRODUCT Compensation of employees Wage and salary accruals Disbursements Wage accruals less disbursements Supplements to wages and salaries Taxes on Production and Imports Less subsidies Profits tax liability Net Operating Surplus Private enterprises Current surplus of government enterprises Consumption of fixed capital Gross domestic income Statistical discrepancy GROSS DOMESTIC PRODUCT Account1. National Income and Product Account

5. Selected NIPA Health Expenditures Personal Consumption Expenditures for medical care Gross private domestic medical care investment Fixed investment Nonresidential Producers Durable Equipment Government Health Care consumption expenditures and gross investment Federal State and local National Health Expenditures Personal Health Care Hospitals Physicians Services Dental Services Other Professional Services Home Health Care Non-durable Medical Products Durable Medical Equipment Nursing Home Care Other Personal Health Care Government Public Health Activity Admin. and Net Cost of PHI Non-commercial Research Investment in medical sector capital NIPA Compared to NHEA

7. What makes the NHEA useful? • Captures all spending for health care goods and services • Allows policy makers to evaluate Medicare and Medicaid spending relative to other health spending • Reconciles data sources (program data, government statistical data, private sector data) • Serves as basis for development of predictive and analytic models • Allows states to compare spending to each other • Provides basis for developing projections consistent with official Medicare and Medicaid program projections

8. Regular NHEA Products • Historical NHE • Released annually in January • Currently available for 1960-2005 • By type of service/good and source of funding • By sponsor (household, business, government) for 1987-2005 • Short-Run Projections • Released annually in February • Currently available through 2016 • By type of service/good and source of funding

9. Periodic NHEA Products • Personal Health Care Spending Estimates by State • By provider: currently available for 1980-2004 • By type of service/good and major source of funding (Medicare, Medicaid, and other) • By residence: to be released late-Summer 2007 • Personal Health Care Spending Estimates by Age • Currently available for selected years (1987, 1996, 1999) • By type of service/good and source of funding • Seven age groups (0-18, 19-44, 45-54, 55-64, 65-74, 75-84, 85+) • Updated information through 2004 to be released late-2007

10. Completed Estimates/Research • Comprehensive Revision in 2005 • Added medical equipment • Benchmarked to 2002 Economic Census and AHA data • Methodological and definitional changes • Paper on “Reconciling Medical Expenditure Estimates from the MEPS and NHEA” • Paper on “Monitoring Health Spending Increases: Incremental Budget Analyses Reveal Challenging Tradeoffs” http://www.cms.hhs.gov/HealthCareFinancingReview/ • Paper on “Refining Estimates of Public Health Spending as Measured in the NHEA: The U.S. Experience” in the Journal of Public Health Management and Practice

11. Ongoing Projects • Reconciliation of NIPA and NHE • Legislatively-required 75-year health spending projections • Methodological changes to reflect Part D • Measuring private health insurance by state • OECD support • Estimating spending by function • System of Health Accounts (SHA) revision

12. Ongoing Projects, cont. • Data source improvement efforts • Census (Service Annual Survey, Quarterly Services Survey, NAPCS) • Government Public Health • Industry (Drugs and private health insurance) • Contributions to other health measurement work • Nonmarket (CNSTAT and academics) • Disease and Outcomes (HHS involvement in investigating issues)