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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

(

(II)

JOINT ECONOMIC COMMITTEE

[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]

SENATE

ROBERT F. BENNETT, Utah, Chairman

SAM BROWNBACK, Kansas

JEFF SESSIONS, Alabama

JOHN SUNUNU, New Hampshire

LAMAR ALEXANDER, Tennessee

SUSAN COLLINS, Maine

JACK REED, Rhode Island

EDWARD M. KENNEDY, Massachusetts

PAUL S. SARBANES, Maryland

JEFF BINGAMAN, New Mexico

HOUSE OF REPRESENTATIVES

JIM SAXTON, New Jersey, Vice Chairman

PAUL RYAN, Wisconsin

JENNIFER DUNN, Washington

PHIL ENGLISH, Pennsylvania

ADAM H. PUTNAM, Florida

RON PAUL, Texas

PETE STARK, California

CAROLYN B. MALONEY, New York

MELVIN L. WATT, North Carolina

BARON P. HILL, Indiana

PAUL A. YOST, Executive Director

WENDELL PRIMUS, Minority Staff Director

(III)

C O N T E N T S

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

(1)

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

2

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.]

3

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 incomerelate 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 reelected, 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.

4

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

5

types of residences, including assisted living, as well as nursing

home.

We can directly focus on the question of long-term care and longterm care insurance. We actually have an actuarial center that specializes in that and in setting up criteria for qualification for longterm 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 31⁄2 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.

6

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.

7

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.

8

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.]

9

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

10

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 proVerDate 03-FEB-2003 15:51 Dec 14, 2004 Jkt 096735 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 D:\JEC\96735.TXT SSC2 PsN: SSC2
11

grams 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.

12

(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 longterm 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.

13

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 longterm 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.

14

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.

15

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.

16

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 LongTerm 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.

17

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.

18

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.

19

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 overcounted.

20

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.

21

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

22

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, 161⁄2 versus 171⁄2 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.

23

Dr. Manton, Mr. Lubitz has projected that the expenses of longterm 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.

24

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.

25

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.

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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.]

(27)

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.

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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 MediVerDate 03-FEB-2003 15:51 Dec 14, 2004 Jkt 096735 PO 00000 Frm 00057 Fmt 6601 Sfmt 6621 D:\JEC\96735.TXT SSC2 PsN: SSC2
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care 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 approVerDate 03-FEB-2003 15:51 Dec 14, 2004 Jkt 096735 PO 00000 Frm 00058 Fmt 6601 Sfmt 6621 D:\JEC\96735.TXT SSC2 PsN: SSC2
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priateness 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 spendVerDate 03-FEB-2003 15:51 Dec 14, 2004 Jkt 096735 PO 00000 Frm 00059 Fmt 6601 Sfmt 6621 D:\JEC\96735.TXT SSC2 PsN: SSC2
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ing. 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

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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 FederalState 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 analVerDate 03-FEB-2003 15:51 Dec 14, 2004 Jkt 096735 PO 00000 Frm 00084 Fmt 6601 Sfmt 6621 D:\JEC\96735.TXT SSC2 PsN: SSC2
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ysis 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’’ longterm 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

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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 risksharing and equity by adopting the national policy and committing the Federal resources which that will require.

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