E.

Pluralism in the Health Care Industry

F. Personal Health Habits--Environmental Factors

10

10

12

14

16

16

19

21

25

28

29

24

HEALTH CARE EXPENDITURES AND THEIR CONTROL

INTRODUCTION

The soaring expenditures for health services have become an increasingly important policy issue, especially over the past 10 years. As the nation's leading health care purchaser, the issue is of particular importance to the Federal Government. Between 1965 and 1976, the percentage of health expenditures funded through Federal, State, and local sources has risen from 24.5 percent to 42.2 percent.

This report analyzes the increases in health care expenditures that have taken place and the major factors that have produced them. Following this background on the nature of inflation in the health care segment of the economy, the report discusses the various measures that have been proposed or attempted in an effort to contain it.

National health expenditures have increased for nearly 50 years in aggregate terms, on a per capita basis, and as a percent of the Gross National Product (GNP). These expenditures, which include all public and private spending for health care services, medical facility construction, research, and other health expenditures, amounted to $3.6 billion in FY 1929, which was approximately $29 per capita and 3.5 percent of the GNP. By FY 1976, expenditures totalled $139.3 billion, nearly $638 per capita and 8.6 percent of the GNP. The growth in national health expenditures is shown in the following table.

AGGREGATE AND PER CAPITA NATIONAL HEALTH EXPENDITURES, AND
PERCENT OF GROSS NATIONAL PRODUCT, SELECTED
FISCAL YEARS, 1929-1976

Source: Gibson, Robert M., and Mueller, Marjorie Smith.

"National

Health Expenditures, Fiscal Year 1976." Social Security Bulletin, Vol. 40, No. 4, April, 1977.

The rate of growth in national health expenditures has averaged 8.1 percent per year from FY 1929-FY 1976. In the 1930's, the decade of the great depression, expenditures grew at an annual rate of less than one percent, but in the 1940's, expenditures increased by an average of 12 percent per year. The average annual increase in

the 1950's and early 1960's dropped to approximately 8 percent per year. Since FY 1965, the last year before the enactment of Medicare and Medicaid, expenditures have increased at a rate greater than 12 percent per year. In the last two years, the annual growth has been higher. Expenditures increased by 15 percent in FY 1975 and 14 percent in FY 1976. The following table presents the data:

AVERAGE ANNUAL INCREASE, NATIONAL HEALTH EXPENDITURES,
SELECTED FISCAL YEARS FROM 1929-1976

Source: Gibson, Robert M., and Mueller, Marjorie Smith.

"National

Health Expenditures, Fiscal Year 1976." Social Security Bulletin, Vol. 40, No. 4, April, 1977.

B. National Health Expenditures, by Type of Service

Expenditures for hospital care and nursing home care have accounted for a consistently increasing proportion of national health expenditures. As shown in the following table, hospital care expenditures have increased from 18.1 percent of total expenditures in FY 1929 to 33.8 percent in FY 1965 and 39.8 percent in FY 1976. Nursing home care expenditures have increased from less than one percent of the total in FY 1940 to 3.3 percent in FY 1965 and 7.6 percent in FY 1976.

92-202 O 77-39

Preliminary estimate.

CRS-4