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Ageing and Health Care Costs

Ageing and Health Care Costs

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Ageing and Health Care Costs

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  1. Ageing and Health Care Costs Timothy M. Smeeding Director, Center for Policy Research Maxwell School, Syracuse University for ACERH Policy Forum Brisbane, Australia February 22, 2008

  2. I. Openers • Two Components of “Health Care” to Examine: Acute (‘hospital, doctor, drugs’) Care and Chronic (‘long term’) Care • Acute Care Drivers • Chronic Care Drivers • USA Bottom Line (next page): Driving Forces Are Not Ageing per se for Acute Care Costs, but… • Ageing is Important for Chronic-LT Care Costs

  3. Sources of Growth in Projected Federal Spending on Medicare and Medicaid

  4. II. Sources of Well-being in Old Age • “Residential and Consumptive Living” • “Medical Care” (Acute Care and Medicine) • “Preventive Care” (Health Promotion) • “Assistive Services” (Care Giving) • “Caring and Empathy” (Priceless) Focus here is #2 and #4 only #1 Not a big Issue in USA, nor in Australia #3 and #5 are important but beyond my expertise

  5. III . Financial Context and Solutions for Acute Care Costs • US and Oz Cost Pressure Sources: Technology and Treatments (Figure 1; Table 1) • The Fiscal Burden is Health Care (Acute and LTC), Not Social Retirement (Figure 2) • Discussion

  6. Table 1: Public Expenditure Health Care Cost Growth Country Cost Level Cost Growth (Per cap) Rate (‘95-’05) USA $6,401 3.7% Australia $3,218 4.8%

  7. Figure 1. Federal Spending for Medicare and Medicaid (as percent of GDP) Source: Congressional Budget Office. 2003. The Long-Term Budget Outlook. CBO: Washington, D.C

  8. Figure 2. Medicare, Medicaid (Federal only) and Social Security Outlays (as percent of GDP) Social Security Medicare Medicaid 30% 25% 20% 15% 10% 5% 0% 1962 1969 1976 1983 1990 1997 2004 2011 2018 2025 2032 2039 2046 2053 2060 2067 2074 Source: 2004 Annual Report of the Social Security and Medicare Boards of Trustees and data underlying the Congressional Budget Office. 2003. The Long-Term Budget Outlook. CBO: Washington, D.C

  9. 3. Discussion • Costs are Rising for Acute Care, Driven by Greater Use and Availability of High-Tech Medicine, Increased Service Use and New and Better Prescription Drugs • WHY? Higher Incomes and More Beneficial Treatments—Only in Part Related to Ageing • Policy Issues: - Greater Cost Effectiveness - Who Should Pay as Big Debate: Private-public dimensions (US estimates) Generational transfers (public financing) Ability to pay (GWB proposal)

  10. IV. How Does USA Pay for Chronic-LTC Now? US Perspectives • Money and Family (Donated) Care (Figures 7, 8) • Trends by Source of Financing: Medicaid vs. Medicare (Figure 9)

  11. Figure 7. Estimated Percentage Shares of Spending on Long-Term Care for the Elderly, 2004

  12. Figure 8. Long-Term Care Expenditures for the Elderly, by Source of Payment, 2004

  13. Figure 9. Medicaid Long-Term Care Expenditures for Elderly Beneficiaries, Fiscal Years 1992 to 2004

  14. C. What About Future Costs? • USA : LTC Costs will grow from $195 billion (2.0% GDP) to $540-769 billion (2.3-3.3% GDP) by 2040 & Similar Forecast for Oz • Why? - Ageing in 85+ groups - Fewer Children with Less Free Time • How Can We Manage This?

  15. V. LTC Future Financing • Public Sector Support will Likely be Weak, BUT Private Wealth is Also Rising • Role and Value of the Home is Increasing for Aged USA: 80+ Percent Owners, ¾ with Equity of $50,000 or Higher Australia: 85+ Percent Owners, ¾ with Equity of $100,000 or Higher

  16. V. Future Financing, Cont’d • How to Turn Housing Wealth into Assistive Services? • Home Equity Based Loans • Recapture of Costs Post Death

  17. VI. Conclusions • Prisoners of our Own Success: Healthy, Continued Ageing is GOOD! • Acute and Chronic Costs can be Separated and Dealt With • Ageing Better Means More Health Care Services of Both Types • Policy Needs to Recognize the Blessings and Then How to Accommodate the Needs