APPENDIX C. NATIONAL AND INTERNATIONAL HEALTH CARE EXPENDITURES AND HEALTH INSURANCE COVERAGE CONTENTS National Health Expenditures Expenditures for Hospital Care Trends in Hospital Utilization Admissions Average Length of Stay Hospital Occupancy Hospital Employment Expenditures for Physicians' Services Supply of Hospital Beds Supply of Physicians Health Insurance Status in 1998 Health Insurance Coverage and Selected Population Characteristics Characteristics of the Uninsured Population Under Age 65 Trends in Health Insurance Coverage Uncompensated Care Costs in PPS Hospitals, 1980-98 International Health Spending References NATIONAL HEALTH EXPENDITURES In 1965, the year prior to the beginning of the Medicare and Medicaid Programs, national health expenditures were only $41.1 billion. After adjusting for inflation, this spending figure represented $212.9 billion, or $1,043 per capita in constant 1998 dollars. Health care expenditures increased substantially over the next 30 years and reached $1 trillion for the first time in 1996. In 1998, the Nation's health care bill was $4,094 per capita, or $1,149.1 billion for the 270 million persons residing in the United States (tables C-1, C-2, and C-3). The annual rate of increase in inflation-adjusted per capita expenditures was 4.8 percent from 1980 to 1985 and 5.0 percent from 1985 to 1990. The rate decelerated to 3.0 percent for 1990-95. Over the 1995-98 period, growth averaged 1.7 percent per year. After growing only 0.7 percent from 1995 to 1996, however, growth in health spending again increased by 1.4 percent between 1996 and 1997. Between 1997 and 1998 the growth rate was 3.0 percent (table C-3). While growth in spending remains its slowest in more than three decades, this latest upswing may ``signal important changes taking place in the Nation's health care system'' (Levit et al., 2000). TABLE C-1.--NATIONAL HEALTH EXPENDITURES, AGGREGATE AMOUNTS FOR SELECTED CALENDAR YEARS 1960-98 [In billions of dollars] -------------------------------------------------------------------------------------------------------------------------------------------------------- Spending category 1960 1965 1970 1975 1980 1985 1990 1995 1996 1997 1998 -------------------------------------------------------------------------------------------------------------------------------------------------------- Health services and supplies...................... $25.2 $37.7 $67.9 $122.3 $235.6 $412.3 $674.8 $962.5 $1,007.5 $1,053.5 $1,113.7 Personal health care.......................... 23.6 35.2 63.8 114.5 217.0 376.4 614.7 879.1 924.0 968.6 1,019.3 Hospital care............................. 9.3 14.0 28.0 52.6 102.7 168.3 256.4 347.0 359.4 370.2 382.8 Physicians' services...................... 5.3 8.2 13.6 23.9 45.2 83.6 146.3 201.9 208.5 217.8 229.5 Dentists' services........................ 2.0 2.8 4.7 8.0 13.3 21.7 31.6 45.0 47.5 51.1 53.8 Other professional services............... 0.6 0.9 1.4 2.7 6.4 16.6 34.7 53.6 57.4 61.5 66.6 Home health care.......................... 0.1 0.1 0.2 0.6 2.4 5.6 13.1 29.1 31.2 30.5 29.3 Drugs and other medical nondurables....... 4.2 5.9 8.8 13.0 21.6 37.1 59.9 88.6 98.0 108.6 121.9 Vision products and other medical durables 0.6 1.0 1.6 2.5 3.8 6.7 10.5 13.3 14.1 15.1 15.5 Nursing home care......................... 0.8 1.5 4.2 8.7 17.6 30.7 50.9 75.5 80.2 84.7 87.8 Other personal health care................ 0.7 0.8 1.3 2.5 4.0 6.1 11.2 25.1 27.6 29.2 32.1 Program administration and net cost of private 1.2 1.9 2.7 4.9 11.9 24.3 40.5 53.6 52.1 50.3 57.7 health insurance............................. Government public health activities........... 0.4 0.6 1.3 2.9 6.7 11.6 19.6 29.8 31.3 34.6 36.6 Research and construction of medical facilities... 1.7 3.4 5.3 8.4 11.6 16.4 24.5 30.8 32.0 34.8 35.3 ----------------------------------------------------------------------------------------------------- Total................................. 26.9 41.1 73.2 130.7 247.3 428.7 699.4 993.3 1,039.4 1,088.2 1,149.1 ===================================================================================================== Percent of gross domestic product..... 5.1 5.7 7.1 8.0 8.9 10.3 12.2 13.7 13.6 13.4 13.5 -------------------------------------------------------------------------------------------------------------------------------------------------------- Note.--Numbers may not add to totals due to rounding. Source: Health Care Financing Administration, Office of the Actuary. TABLE C-2.--NATIONAL HEALTH EXPENDITURES IN CONSTANT 1998 DOLLARS, SELECTED CALENDAR YEARS 1960-98 [In billions of dollars] -------------------------------------------------------------------------------------------------------------------------------------------------------- Spending category 1960 1965 1970 1975 1980 1985 1990 1995 1996 1997 1998 -------------------------------------------------------------------------------------------------------------------------------------------------------- Health services and supplies................. $138.7 $196.2 $285.2 $370.7 $466.1 $524.7 $841.6 $1,029.5 $1,045.6 $1,069.9 $1,113.7 Personal health care..................... 130.2 182.0 268.1 346.9 429.3 570.3 766.6 940.3 959.9 983.7 1,019.3 Hospital care........................ 51.1 72.5 117.6 159.3 203.2 254.9 319.8 371.1 373.4 376.0 382.8 Physicians' services................. 29.1 42.4 57.0 72.4 89.5 126.7 182.5 216.9 218.6 221.1 229.5 Dentists' services................... 10.8 14.6 19.8 24.1 26.4 32.8 39.4 48.1 49.4 51.9 53.8 Other professional services.......... 3.3 4.6 6.9 8.3 12.6 25.2 43.2 57.4 59.7 62.4 66.6 Home health care..................... 0.3 0.5 0.5 1.9 4.7 8.6 15.4 31.1 32.4 30.9 29.3 Drugs and other medical nondurables.. 23.4 30.6 37.0 39.5 42.8 55.1 74.7 94.8 101.3 110.3 121.9 Visions products and other medical 3.6 5.2 6.8 7.7 7.6 10.2 13.0 14.3 14.7 15.3 15.5 durables............................ Nursing home care.................... 4.7 7.6 17.7 26.3 34.9 48.5 63.6 80.7 83.4 86.0 87.8 Other personal health care........... 3.8 4.3 5.5 7.6 7.9 9.3 14.0 26.9 28.7 29.7 32.1 Program administration and net cost of 6.4 10.0 11.4 14.9 23.5 35.8 50.6 57.3 64.1 61.1 57.7 private health insurance................ Government public health activities...... 2.0 3.2 5.7 8.9 13.3 17.6 24.5 31.9 32.6 35.1 36.6 Research and construction of medical 9.4 17.3 22.6 25.4 23.0 24.8 30.6 32.9 33.2 36.3 35.3 facilities.................................. ---------------------------------------------------------------------------------------------------------- Total............................ 148.0 212.9 307.7 396.1 489.1 649.5 872.2 1,062.4 1,079.8 1,105.2 1,149.1 -------------------------------------------------------------------------------------------------------------------------------------------------------- Note.--Constant dollar expenditures are calculated using the Consumer Price Index for All Urban Consumers. Source: Health Care Financing Administration, Office of the Actuary, National Health Statistics Group. TABLE C-3.--NATIONAL HEALTH EXPENDITURES: PER CAPITA AMOUNTS IN CONSTANT 1998 DOLLARS AND AVERAGE ANNUAL PERCENTAGE INCREASES, SELECTED CALENDAR YEARS 1960-98 [Dollar amounts per capita] -------------------------------------------------------------------------------------------------------------------------------------------------------- Spending category 1960 1965 1970 1975 1980 1985 1990 1995 1996 1997 1998 -------------------------------------------------------------------------------------------------------------------------------------------------------- Health services and supplies........................... $729 $958 $1,328 $1,851 $1,952 $2,527 $3,235 $3,769 $3,798 $3,845 $3,988 Personal health care............................... 685 892 1,248 1,545 1,828 2,307 2,947 3,442 3,483 3,537 3,832 Hospital care.................................. 269 356 548 709 884 1,031 1,229 1,359 1,365 1,352 1,384 Physicians' services........................... 153 208 205 323 381 512 702 790 785 795 818 Dentists' services............................. 57 71 91 107 112 133 151 176 179 187 192 Other professional services.................... 18 22 27 37 53 102 166 210 217 224 237 Home health care............................... 2 2 4 8 20 35 63 114 117 111 104 Drugs and other medical nondurables............ 123 149 172 175 182 227 287 347 369 395 434 Vision products and other medical durables..... 19 25 32 34 32 41 50 52 53 55 55 Nursing home care.............................. 25 37 82 117 148 155 244 296 302 308 313 Other personal health care..................... 20 20 25 33 34 37 54 98 104 107 114 Program administration and net cost of private 34 49 53 65 100 149 194 210 196 184 206 health insurance.................................. Government public health activities................ 11 16 26 40 57 71 94 117 118 126 131 Research and construction of medical facilities........ 49 87 105 113 98 100 118 120 120 127 128 ------------------------------------------------------------------------------------------------ Total...................................... 779 1,043 1,433 1,764 2,080 2,627 3,353 3,889 3,918 3,973 4,094 -------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------- Average annual percentage increase -------------------------------------------------------------------------------------------------- 1960-65 1965-70 1970-75 1975-80 1980-85 1985-90 1990-95 1995-96 1996-97 1997-98 1995-98 -------------------------------------------------------------------------------------------------------------------------------------------------------- Health services and supplies......................... 5.6 6.8 4.4 3.7 5.0 6.1 3.1 0.8 1.3 3.2 1.7 Personal health care............................. 5.4 7.0 4.4 3.4 4.8 5.0 3.2 1.2 1.6 2.7 1.8 Hospital care................................ 5.8 9.0 5.3 4.0 3.6 3.6 2.0 0.4 -1.0 0.9 0.1 Physicians' services......................... 6.3 5.0 4.0 3.4 6.1 6.5 2.4 -0.5 1.1 2.9 1.2 -------------------------------------------------------------------------------------------------- Total.................................... 6.0 6.5 4.2 3.4 4.8 5.0 3.0 0.7 1.4 3.0 1.7 -------------------------------------------------------------------------------------------------------------------------------------------------------- Note.--Constant dollar expenditures are calculated using the Consumer Price Index for All Urban Consumers. Source: Health Care Financing Administration, Office of the Actuary. The majority of health spending is for personal health care services that treat or prevent illness and disease in individuals. In 1998, 88.7 percent of all health spending ($1,019.3 billion) was for personal health care. The remaining 11.3 percent ($129.8 billion) was spent on health program administration; administrative costs and profits earned by private health insurers; public health activities; noncommercial health research; and new construction of health facilities. Hospital care ($382.8 billion) and physician services ($229.5 billion) are the two largest categories of personal health care spending. They accounted for 33.3 percent and 20 percent of total national health expenditures. Another major service area, prescription drugs and other medical nondurables, grew from 8.6 percent of all national health expenditures in 1990 to 10.6 percent in 1998 (table C-3). The private sector, including private health insurance, out-of-pocket spending, and philanthropy, continues to finance the majority of personal health care expenditures (56.4 percent) with combined expenditures in 1998 of $574.5 billion (table C-4). The share paid by private sources remained stable at about 60 percent from 1980 to 1990, and then declined to 55.2 percent in 1996 reflecting the influence of increased enrollment in managed care plans which had lower rates of increase than fee- for-service. In 1997, however, private spending increased to 55.5 percent and in 1998, to 56.4 percent of personal health expenditures. Acceleration in private spending comes primarily from private health insurance premiums, which jumped from a 3.5-percent increase in 1997 to an 8.2-percent increase in 1998 (Levit et al., 2000). With the private share increasing, public spending as a share of personal health care expenditures declined in 1997 for the first time in 10 years. Government's share had grown from 20.6 percent in 1965 to 44.8 percent in 1996. In 1997, this decreased to 44.5 percent. In 1998, public sources (Federal, State, and local governments) were responsible for 43.6 percent of personal health expenditures or a total of $444.9 billion (table C-4). The initial growth in Federal Government spending is attributed to the beginning of the Medicare and Medicaid Programs and the expansion of Medicare to cover the disabled population in 1973. In 1965, before the enactment of these programs, the Federal Government contribution represented 8.4 percent of personal health spending. By 1970, the Federal Government's share had increased to 23 percent and to 27 percent by 1975. Between 1980 and 1990 the portion remained steady at approximately 29 percent, but since 1990, this figure gradually increased to 34.5 percent in 1996. The initial impact of the Balanced Budget Act of 1997 and successful efforts to combat fraud and abuse helped to reduce this share to 33.7 percent in 1998 (Levit et al., 2000). The Federal Government is still the single largest contributor, accounting for 33.7 percent ($343.6 billion) of personal health spending in 1998. State and local governments funded another 9.9 percent ($101.3 billion; table C-4). TABLE C-4.--PERSONAL HEALTH CARE EXPENDITURES: AGGREGATE AMOUNTS AND PERCENTAGE DISTRIBUTION, SELECTED CALENDAR YEARS 1960-98 -------------------------------------------------------------------------------------------------------------------------------------------------------- Spending source 1960 1965 1970 1975 1980 1985 1990 1995 1996 1997 1998 -------------------------------------------------------------------------------------------------------------------------------------------------------- Amount in billions of dollars ---------------------------------------------------------------------------------------------------------- Private...................................... $18.5 $27.9 $41.3 $69.2 $130.1 $228.8 $373.5 $487.9 $510.0 $537.7 $574.5 Private health insurance................. 5.0 8.7 14.8 28.4 62.0 114.1 207.7 286.3 298.1 312.4 337.0 Out-of-pocket payments................... 13.1 18.5 24.9 38.1 60.3 100.7 145.0 170.5 178.1 189.1 199.5 Other private sources of funds........... 0.4 0.7 1.6 2.7 7.8 14.0 20.8 31.1 33.8 36.3 37.9 Public....................................... 5.1 7.3 22.5 45.3 87.0 147.7 241.1 391.2 414.0 430.9 444.9 Federal.................................. 2.1 3.0 14.7 30.9 63.4 111.1 177.0 299.0 319.1 333.4 343.6 State and local.......................... 3.0 4.3 7.8 14.4 23.6 36.6 64.2 92.2 94.9 97.5 101.3 ---------------------------------------------------------------------------------------------------------- Total................................ 23.6 35.2 63.8 114.5 217.0 376.4 614.7 879.1 924.0 968.6 1,019.3 ---------------------------------------------------------------------------------------------------------- Percentage distribution ---------------------------------------------------------------------------------------------------------- Private...................................... 78.3 79.4 64.7 60.4 59.9 60.8 60.8 55.5 55.2 55.5 56.4 Private health insurance................. 21.2 24.7 23.2 24.8 28.6 30.3 33.8 32.6 32.3 32.3 33.1 Out-of-pocket payments................... 55.3 52.7 39.0 33.3 27.8 26.7 23.6 19.4 19.3 19.5 19.6 Other private sources of funds........... 1.8 2.0 2.6 2.4 3.6 3.7 3.4 3.5 3.7 3.7 3.7 Public....................................... 21.7 20.6 35.3 39.6 40.1 39.2 39.2 44.5 44.8 44.5 43.6 Federal.................................. 9.0 8.4 23.0 27.0 29.2 29.5 28.8 34.0 34.5 34.4 33.7 State and local.......................... 12.6 12.2 12.2 12.5 10.9 9.7 10.4 10.5 10.3 10.1 9.9 -------------------------------------------------------------------------------------------------------------------------------------------------------- Note.--Totals may not equal sum of rounded components. Percentage amounts are calculated on unrounded numbers. Source: Health Care Financing Administration, Office of the Actuary. Data from the National Health Statistics Group. EXPENDITURES FOR HOSPITAL CARE In 1998, hospitals accounted for 33 percent of total national health expenditures, down from 42 percent in 1980. Table C-5 shows several measures of costs incurred by community hospitals, which include all non-Federal short-term general hospitals. These hospitals' total expenses (including inpatient and outpatient acute and postacute care, as well as nonpatient care activities) reached $331.5 billion in 1997. This was up 3.3 percent from the previous year, the smallest rise in hospital costs in over 30 years. Inpatient expenses actually decreased in 1997, reflecting the growing share of activity in the hospital outpatient setting. The average cost of a day of hospital care (adjusted to reflect outpatient services) rose by 1.1 percent to $1,202 in 1997. The 1997 data continues the trend of declining growth rates which began in the early 1990s. The average cost per case (also adjusted to reflect outpatient care) fell to $6,526, a decrease of 0.4 percent. From 1992 through 1997, the increase in costs per case averaged 2.0 percent per year, compared with 9 percent from 1985 through 1992 and 14 percent from 1975 through 1982. Even after taking inflation into account, the recent trend in hospital costs differs sharply from previous years. In 1994, hospital costs per case rose more slowly than inflation for the first time since 1979. Costs per case grew even more slowly relative to inflation in 1995 and 1996; in 1997, the inflation rate was 2.3 while the percent change in average cost per case fell 0.4 percent. A variety of factors other than general inflation contribute to aggregate changes in hospital costs, and the roles of these factors may vary widely over time. Using data compiled in periodic studies by the Prospective Payment Assessment Commission, chart C-1 displays the contributions of five factors: general inflation, hospital input prices, population growth, utilization, and intensity. Between 1985 and 1992, total hospital expenses rose at an annual rate of 10 percent. The largest contributor to this increase was the intensity of hospital care; that is, the resources used per patient. During this period, general inflation also accounted for a large share of the increase in hospital expenses. Hospital input prices rose faster than the general price level, and hospital utilization per person actually fell (as the number of adjusted admissions grew more slowly than the population). Between 1992 and 1996, the increase in total hospital expenses was only 5.3 percent per year. Because of this, although it slowed from 3.9 percent between 1985 and 1992 to 2.8 percent between 1992 and 1996, general inflation accounted for more than half of the hospital cost increase in the latter period. Hospital utilization per person, which had fallen in the earlier period, rose substantially between 1992 and 1996, accounting for a large share of the growth in hospital expenses. Finally, intensity, which had been the major contributor to cost growth in the earlier period, was almost level between 1992 and 1996. TABLE C-5.--SELECTED DATA ON COMMUNITY HOSPITAL EXPENSES, 1965-97 ---------------------------------------------------------------------------------------------------------------- Total expenses Expenses per Expenses per Inpatient expenses -------------------- adjusted adjusted \1\ inpatient day admission ------------------- Year Amount Percent ------------------------------------ Amount (in change Percent Percent (in Percent billions) Amount change Amount change billions) change ---------------------------------------------------------------------------------------------------------------- 1965................................ $9.220 8.6 $41 7.5 $315 8.1 $8.414 8.7 1966................................ 10.497 13.8 46 11.4 356 13.1 9.611 14.2 1967................................ 12.624 20.3 53 15.3 425 19.1 11.551 20.2 1968................................ 14.720 16.6 59 11.5 482 13.4 13.372 15.8 1969................................ 17.247 17.2 68 15.4 551 14.5 15.636 16.9 1970................................ 20.261 17.5 78 13.8 608 10.3 18.329 17.2 1971................................ 22.496 11.0 87 12.3 670 10.1 20.269 10.6 1972................................ 25.223 12.1 96 10.3 729 8.8 22.622 11.6 1973................................ 28.248 12.0 105 9.2 784 7.5 25.173 11.3 1974................................ 32.759 16.0 118 12.3 873 11.4 29.077 15.5 1975................................ 38.492 17.5 138 16.4 1,017 16.5 33.971 16.8 1976................................ 45.842 19.1 158 15.0 1,168 14.8 40.321 18.7 1977................................ 53.006 15.6 181 14.3 1,312 12.3 46.437 15.2 1978................................ 59.802 12.8 203 12.1 1,466 11.8 52.131 12.3 1979................................ 67.833 13.4 226 11.5 1,618 10.4 59.060 13.3 1980................................ 79.340 17.0 256 12.9 1,836 13.5 68.962 16.8 1981................................ 94.187 18.7 299 16.9 2,155 17.4 81.634 18.4 1982................................ 109.091 15.8 348 16.2 2,489 15.5 94.346 15.6 1983................................ 120.220 10.2 391 12.4 2,742 10.2 103.361 9.6 1984................................ 126.028 4.8 443 13.3 2,947 7.5 107.005 3.5 1985................................ 134.043 6.4 493 11.3 3,226 9.5 111.416 4.1 1986................................ 146.032 8.9 535 8.6 3,527 9.3 119.286 7.1 1987................................ 161.322 10.5 581 8.6 3,860 9.5 129.824 8.8 1988................................ 177.770 10.2 632 8.8 4.194 8.7 140.482 8.2 1989................................ 195.378 9.9 690 9.3 4,586 9.3 152.147 8.3 1990................................ 217.113 11.1 765 10.7 5,021 9.5 165.792 9.0 1991................................ 238.633 9.9 844 10.3 5,461 8.8 178.401 7.6 1992................................ 260.994 9.4 927 9.9 5,905 8.1 191.401 7.3 1993................................ 278.880 6.9 1,000 7.8 6,188 4.8 202.055 5.6 1994................................ 292.801 5.0 1,060 6.0 6,312 2.0 207.918 2.9 1995................................ 308.411 5.3 1,127 6.3 6,427 1.8 214.594 3.2 1996................................ 320.789 4.0 1,188 5.4 6,553 2.0 218.013 1.6 1997................................ 331.482 3.3 1,202 1.1 6,526 -0.4 217.888 -0.1 ---------------------------------------------------------------------------------------------------------------- \1\ Inpatient expenses estimated from total expenses, based on the proportion of inpatient to total revenues. Note.--Admissions and inpatient days are adjusted to reflect the volume of outpatient visits as well as inpatient admissions and days. Source: Medicare Payment Advisory Commission analysis of data from the American Hospital Association National Hospital Panel Survey. CHART C-1. FACTORS CONTRIBUTING TO GROWTH OF TOTAL HOSPITAL EXPENSES, 1985-92 AND 1992-96 Note._Hospital expenses grew at an annual rate of 10.0 percent between 1985 and 1992 and 5.3 percent between 1992 and 1996. Source: Prospective Payment Assessment Commission. Expenditures for hospital care are financed primarily by third parties, as shown in table C-6. In 1998, private health insurers paid 30.8 percent of the total, Medicare 32.4 percent, and Medicaid (including both the Federal and State shares) 15.9 percent. The share financed by out-of-pocket payments from individuals was only 3.4 percent in 1998, down from 5.2 percent in 1980, and 9.0 percent in 1970. TRENDS IN HOSPITAL UTILIZATION Admissions For a number of years, the average annual rate of growth in hospital admissions has either been relatively modest or even declined. From 1978 through 1983, total inpatient admissions increased at an annual rate of 1.0 percent, and admissions for persons 65 and older increased an average of 4.8 percent per year, as shown in table C-7. With the introduction of Medicare's prospective payment system (PPS) in 1983, the number of elderly patients declined sharply, contrary to most expectations. However, admissions of patients under 65 fell even more during the first few years of PPS. From 1987 through 1992, total admissions continued to decrease, but at a slower rate, due to an increase in admissions among the older population. In 1993, overall admissions increased for the first time in 12 years, due to a slower rate of decline in younger patients and a continuing increase in those 65 and older. With the exception of 1996, this trend continued through 1997. TABLE C-6.--NATIONAL EXPENDITURES FOR HOSPITAL CARE BY SOURCE OF FUNDS, SELECTED YEARS 1980-98 [In billions of dollars] -------------------------------------------------------------------------------------------------------------------------------------------------------- 1980 1985 1990 1995 1998 Source of payment ----------------------------------------------------------------------------------------- Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent -------------------------------------------------------------------------------------------------------------------------------------------------------- Out of pocket................................................. $5.3 5.2 $8.8 5.2 $9.8 3.8 $11.4 3.3 $12.8 3.4 Third-party................................................... 97.4 94.8 159.4 94.8 246.8 96.2 338.7 96.7 370.0 96.6 Private health insurance.................................... 38.7 37.7 61.0 36.3 95.7 37.3 113.1 32.3 118.0 30.8 Other private funds......................................... 5.0 4.9 8.3 4.9 13.8 5.4 11.3 3.2 19.1 5.0 Government.................................................. 53.7 52.3 90.1 53.6 137.3 53.5 214.3 61.2 232.9 60.8 Federal................................................... 40.9 39.8 71.1 42.3 103.4 40.3 175.4 50.1 187.4 48.9 Medicare................................................ 26.3 25.6 48.9 29.1 68.5 26.7 112.6 32.2 123.9 32.4 Medicaid \1\............................................ 4.6 4.4 7.4 4.4 14.9 5.8 37.2 10.6 37.4 9.8 Other Federal........................................... 9.9 9.7 14.8 8.8 20.0 7.8 25.5 7.3 26.0 6.8 State and local........................................... 12.8 12.5 19.0 11.3 33.9 13.2 39.0 11.1 45.5 11.9 Medicaid \2\............................................ 3.9 3.8 6.3 3.7 11.6 4.5 14.8 4.2 23.4 6.1 Other State and local................................... 8.9 8.7 12.8 7.6 22.3 8.7 24.2 6.9 22.1 5.8 ----------------------------------------------------------------------------------------- Total................................................. 102.7 100.0 168.2 100.0 256.5 100.0 350.1 100.0 382.8 100.0 -------------------------------------------------------------------------------------------------------------------------------------------------------- \1\ Federal share only. \2\ State and local share only. Source: Health Care Financing Administration, Office of the Actuary. Data from the National Health Statistics Group. TABLE C-7.--ANNUAL CHANGE IN HOSPITAL ADMISSIONS BY AGE GROUP, 1978-97 ------------------------------------------------------------------------ Percent change in admissions -------------------------------- Year 65 and All Under 65 older ------------------------------------------------------------------------ 1978................................... 0.4 -1.0 4.9 1979................................... 2.7 1.7 5.3 1980................................... 2.9 1.5 6.7 1981................................... 0.9 0.0 3.0 1982................................... 0.0 -1.6 4.1 1983................................... -0.5 -2.8 4.7 1984................................... -3.7 -4.2 -2.6 1985................................... -4.9 -4.7 -5.2 1986................................... -2.1 -2.5 -1.0 1987................................... -0.6 -1.0 0.4 1988................................... -0.4 -1.6 2.0 1989................................... -1.0 -2.0 1.2 1990................................... -0.5 -1.6 1.7 1991................................... -1.1 -2.9 2.5 1992................................... -0.8 -2.2 1.7 1993................................... 0.7 -0.5 2.9 1994................................... 0.9 0.2 2.0 1995................................... 1.4 0.4 2.9 1996................................... -0.4 -0.8 0.4 1997................................... 0.4 -0.3 1.4 -------------------------------- Average annual percent change -------------------------------- 1978-83................................ 1.0 -0.4 4.8 1984-86................................ -3.5 -3.8 -3.0 1987-92................................ -0.7 -1.9 1.6 1992-97................................ 0.6 -0.2 1.9 ------------------------------------------------------------------------ Source: Medicare Payment Advisory Commission analysis of data from the American Hospital Association National Hospital Panel Survey. Average Length of Stay Before the implementation of PPS, the average length of stay for all patients was relatively constant between 7.0 and 7.2 days, as shown in table C-8. With the introduction of PPS there was a significant drop in length of stay. From 1982 to 1984, the average stay fell from 7.2 days to 6.7 days for all patients and from 10.1 days to 8.9 days for patients 65 and older. Average length of stay stabilized at these levels throughout the rest of the 1980s, but has declined again in the 1990s. Hospital stays for elderly patients were 2.2 days shorter, on average, in 1997 than in 1990, and for patients under 65 the average stay was 0.7 days shorter. This decline was even steeper than in the first years of PPS. TABLE C-8.--AVERAGE LENGTH OF STAY AND ANNUAL CHANGE BY AGE GROUP, 1978-97 ---------------------------------------------------------------------------------------------------------------- All Under 65 65 and older ----------------------------------------------------------------- Average Average Average Year length of Percent length of Percent length of Percent stay (in change stay (in change stay (in change days) days) days) ---------------------------------------------------------------------------------------------------------------- 1978.......................................... 7.2 -0.3 6.0 -0.9 10.6 -1.2 1979.......................................... 7.1 -1.0 5.9 -1.2 10.4 -1.9 1980.......................................... 7.2 0.5 5.9 -0.2 10.4 -0.1 1981.......................................... 7.2 0.4 5.9 0.1 10.4 -0.1 1982.......................................... 7.2 -0.6 5.9 -0.6 10.1 -2.3 1983.......................................... 7.0 -2.0 5.8 -1.7 9.7 -4.4 1984.......................................... 6.7 -5.1 5.6 -3.5 8.9 -7.5 1985.......................................... 6.5 -1.7 5.5 -1.3 8.8 -2.1 1986.......................................... 6.6 0.6 5.6 0.5 8.8 0.4 1987.......................................... 6.6 0.8 5.6 0.4 8.9 1.0 1988.......................................... 6.6 -0.1 5.6 -0.3 8.8 -0.7 1989.......................................... 6.6 0.1 5.5 -0.7 8.8 0.2 1990.......................................... 6.6 -1.1 5.4 -1.5 8.7 -1.5 1991.......................................... 6.5 -1.4 5.3 -2.1 8.5 -2.0 1992.......................................... 6.4 -1.6 5.2 -1.9 8.3 -2.2 1993.......................................... 6.2 -2.8 5.1 -1.8 7.9 -4.7 1994.......................................... 6.0 -3.8 4.9 -3.8 7.6 -4.2 1995.......................................... 5.7 -4.2 4.8 -2.4 7.1 -6.6 1996.......................................... 5.5 -3.3 4.8 -1.3 6.7 -5.6 1997.......................................... 5.4 -1.5 4.7 -0.6 6.5 -2.7 ----------------------------------------------------------------- Average annual percent change ----------------------------------------------------------------- 1978-83....................................... ........... -0.5 ........... -0.8 ........... -1.7 1984-86....................................... ........... -2.1 ........... -1.4 ........... -3.1 1987-92....................................... ........... -0.6 ........... -1.0 ........... -0.9 1992-97....................................... ........... -3.1 ........... -2.0 ........... -4.8 ---------------------------------------------------------------------------------------------------------------- Source: Medicare Payment Advisory Commission analysis of data from the American Hospital Association National Hospital Panel Survey. Hospital Occupancy Table C-9 shows that, with slight increases in admissions and stable average length of stay, occupancy rates were over 70 percent in the early 1980s. The number of hospital beds was increasing, exceeding 1 million by 1983. During the early years of PPS, however, occupancy rates decreased dramatically. From 1983 to 1986, the aggregate occupancy rate fell from 72.2 percent to 63.4 percent. There was a slight increase in occupancy rates in the late 1980s, but the sharp reduction in average length of stay lowered the occupancy rate below 60 percent by 1995, despite almost 130,000 fewer beds than in 1983. In 1997, occupancy rates rose by 1.2 percent over the previous year, to 59.6 percent. TABLE C-9.--INPATIENT HOSPITAL OCCUPANCY RATE AND NUMBER OF BEDS, 1978-97 ---------------------------------------------------------------------------------------------------------------- Occupancy Year Inpatient days rate (in Percent Number of Percent percent) change beds change ---------------------------------------------------------------------------------------------------------------- 1978................................................ 256,708,259 73.7 -0.8 954,001 0.9 1979................................................ 260,791,942 74.5 1.0 959,269 0.6 1980................................................ 269,615,111 76.1 2.2 970,456 1.2 1981................................................ 272,956,933 75.8 -0.4 986,917 1.7 1982................................................ 271,422,385 74.5 -1.6 997,720 1.1 1983................................................ 264,504,444 72.2 -3.1 1,003,658 0.6 1984................................................ 241,779,724 66.7 -7.6 992,616 -1.1 1985................................................ 226,128,547 63.6 -4.7 974,559 -1.8 1986................................................ 222,903,834 63.4 -0.3 963,133 -1.2 1987................................................ 223,441,342 64.1 1.2 954,458 -0.9 1988................................................ 222,312,614 64.6 0.8 942,306 -1.3 1989................................................ 220,360,991 64.8 0.3 930,994 -1.2 1990................................................ 216,836,360 64.5 -0.6 921,447 -1.0 1991................................................ 211,474,700 63.5 -1.4 911,781 -1.0 1992................................................ 206,440,330 62.3 -1.9 907,661 -0.5 1993................................................ 202,077,589 61.4 -1.5 901,669 -0.7 1994................................................ 196,116,784 60.3 -1.7 890,575 -1.2 1995................................................ 190,377,347 59.7 -1.1 874,250 -1.8 1996................................................ 183,495,155 58.9 -1.3 853,561 -2.4 1997................................................ 181,313,462 59.6 1.2 833,254 -2.4 ----------------------------------------------------------- Average annual percent change ----------------------------------------------------------- 1978-83............................................. ................ ......... -0.5 ........... 1.0 1984-86............................................. ................ ......... -4.2 ........... -1.4 1987-92............................................. ................ ......... -0.3 ........... -1.0 1992-97............................................. ................ ......... -0.9 ........... -1.7 ---------------------------------------------------------------------------------------------------------------- Source: Medicare Payment Advisory Commission analysis of data from American Hospital Association National Hospital Panel Survey. Hospital Employment Hospitals experienced a significant downturn in total employment levels at the time PPS was introduced, as shown in table C-10. During 1984 and 1985, full-time equivalent employees declined by 2.3 percent. From 1986 through 1993, however, hospital employment increased. During the late 1970s and through the 1980s, growth in the number of part-time personnel exceeded growth in the number of full-time personnel in every year. In 1992, however, the number of full-time personnel grew faster than the number of part-time personnel for the first time in more than 20 years. This trend continued in 1993, but the increase in both types of personnel slowed dramatically. In 1994 hospital employment declined for the first time since the early years of PPS. This was only the second such period in the past three decades. The number of hospital employees continued to decrease until 1997 when both full- and part-time employees increased. Total personnel increased by 0.5 percent over 1996 levels. TABLE C-10.--ANNUAL PERCENT CHANGE IN HOSPITAL EMPLOYMENT, 1978-97 ---------------------------------------------------------------------------------------------------------------- Total full- Personnel time -------------------------------- Year equivalent employees Total Full time Part time ---------------------------------------------------------------------------------------------------------------- 1978............................................................... 3.7 4.1 3.3 6.8 1979............................................................... 3.5 3.9 2.9 6.7 1980............................................................... 4.7 5.2 4.0 9.1 1981............................................................... 5.4 6.0 4.8 9.4 1982............................................................... 3.7 3.7 3.6 4.1 1983............................................................... 1.4 1.5 1.2 2.3 1984............................................................... -2.3 -2.1 -2.6 -0.8 1985............................................................... -2.3 -2.0 -2.7 -0.1 1986............................................................... 0.3 0.4 0.2 0.9 1987............................................................... 0.7 0.9 0.4 2.3 1988............................................................... 1.1 1.4 0.7 3.3 1989............................................................... 1.6 1.9 1.2 3.6 1990............................................................... 2.1 2.3 1.8 3.6 1991............................................................... 0.6 0.7 0.6 1.0 1992............................................................... 1.6 1.5 1.7 0.9 1993............................................................... 0.7 0.6 0.8 0.2 1994............................................................... -0.8 -0.8 -0.7 -0.9 1995............................................................... -1.4 -1.4 -1.5 -0.9 1996............................................................... -0.2 -0.3 0.0 -1.1 1997............................................................... 0.2 0.5 0.1 1.7 -------------------------------------------- Average annual percent change -------------------------------------------- 1978-83............................................................ 3.7 4.1 3.3 6.4 1984-86............................................................ -1.4 -1.2 -1.7 0.0 1987-92............................................................ 1.3 1.5 1.1 2.4 1992-97............................................................ -0.3 -0.3 -0.3 -0.2 ---------------------------------------------------------------------------------------------------------------- Source: Medicare Payment Advisory Commission analysis of data from the American Hospital Association National Hospital Panel Survey. EXPENDITURES FOR PHYSICIANS' SERVICES Health care expenditures for physician services were $229.5 billion in 1998, an increase of 5.4 percent from 1997. This amounted to 20.0 percent of national health expenditures. Third-party (public expenditures and private insurance) payments financed over 84 percent of physician services. In 1998 private health insurance continued to be the single largest payer. This portion grew from 37.9 percent in 1980 to 50.6 percent in 1993. ``The substantial and rapid shift to managed care among employer-sponsored private health insurance and public-program enrollment in the early to mid 1990s,'' however, resulted in the stabilization of the share of physician spending covered by private health insurance. From 1993, this share changed very little and, in 1998, was 50.5 percent (Levit et al., 2000). Public expenditures in this area have grown much more slowly, rising from 28.9 percent in 1980 to 31.9 percent ($73.3 billion) in 1998. Of this last figure, $49.4 billion was for Federal Medicare payments. In contrast, out-of-pocket payments by individuals for physician services have decreased from 32.4 percent in 1980 to 15.6 percent ($35.7 billion) in 1998 (table C-11). Inflation in physicians' fees has outpaced that of the U.S. economy as a whole since 1981 as measured by the Consumer Price Index (CPI). The inflation rate of 2.8 for 1999, however, is the lowest since 1964 (table C-12). Also, the ``excess'' rate of increase in physician services prices above overall inflation since 1993 decreased to an average 1.3 percentage points per year, down from 2.5 percent for the years from 1987 to 1993 (American Medical Association, 1999). Physician revenue and income are directly tied to the prices of physicians' services. The American Medical Association (AMA) reports that, over the 10 years from 1987 to 1997, mean physician income rose from $132,300 to $199,600, an average of 4.2 percent a year. In 1994, however, the average physician net income experienced the first decrease ever recorded by the AMA. After expenses but before taxes, average physician income was $182,400, a 3.6 percent decrease from $189,300 in 1993. From 1993 to 1997, average physician income grew only $10,000 or an average of 1.3 percent per year. Average net income in 1997 was up just 0.3 percent from $199,000 in 1996. Physicians' inflation-adjusted mean income showed no increase between 1993 and 1997 (Levit et al., 2000). According to the AMA, the proportion of physicians who are employees, i.e., who do not have an ownership interest in their main practice, rose at a fairly rapid rate between 1985 and 1992 to 32 percent and increased even more quickly over the next 3 years, rising from 32 percent in 1992 to 43 percent in 1994. This is attributed to a variety of factors, including the growth of managed care, increased competition among health providers, and uncertainty about the Clinton administration's health care reform efforts and its effect on small physician practices. Since 1994, however, the share of employee physicians has declined to 36.1 percent in 1998. This reversal in trend may be due to a change in the health care system and the fact that small physician practices are becoming more viable competitors for managed care contracts (American Medical Association, 1998b). At the same time, the portion of the physician work force who are self-employed (full or part owners of their practices), has risen from 55 percent in 1995 to 62.3 percent in 1998. The average net income for self-employed physicians in 1997 was $228,200, down from $231,600 in 1996 (table C-13). This was still almost 50 percent higher than employee-doctors whose average net income also fell in 1997 to $154,000 from $159,200 in 1996. Self-employed physicians, however, tend to work more hours and see more patients, have additional years of experience, be board certified, and are more likely to be male, all factors associated with higher physician earnings. TABLE C-11.--EXPENDITURES FOR PHYSICIAN SERVICES \1\ BY SOURCE OF FUNDS, SELECTED YEARS 1980-98 [In billions of dollars] -------------------------------------------------------------------------------------------------------------------------------------------------------- 1980 1985 1990 1995 1997 1998 Source of payment ----------------------------------------------------------------------------------------------------------- Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent -------------------------------------------------------------------------------------------------------------------------------------------------------- Out of pocket............................... $14.7 32.4 $24.4 29.2 $32.2 22.0 $30.3 16.0 $33.8 15.5 $35.7 15.6 Third party................................. 30.6 67.6 59.2 70.8 114.2 78.0 171.6 85.0 184.0 84.5 193.8 84.4 Private health insurance.................. 17.1 37.9 33.5 40.1 66.8 45.7 104.2 51.6 109.4 50.2 116.0 50.5 Other private funds....................... 0.4 0.8 1.4 1.6 2.7 1.8 3.8 1.9 4.6 2.1 4.5 2.0 Government................................ 13.1 28.9 24.3 29.1 44.7 30.5 63.6 31.5 70.1 32.2 73.3 31.9 Federal................................. 10.0 22.1 19.4 23.2 35.6 24.3 50.9 25.2 57.4 26.3 60.8 26.5 Medicare.............................. 8.0 17.6 16.3 19.5 29.2 20.0 39.9 19.8 45.6 20.9 49.4 21.5 Medicaid.............................. 1.4 3.1 2.0 2.4 4.1 2.8 8.5 4.2 9.1 4.2 8.8 3.8 Other Federal......................... 0.6 1.4 1.1 1.3 2.2 1.5 2.5 1.3 2.7 1.2 2.6 1.2 State and local......................... 3.1 6.8 4.9 5.9 9.1 6.2 12.6 6.3 12.8 5.9 12.4 5.4 Medicaid.............................. 1.1 2.5 1.5 1.8 2.9 2.0 6.0 3.0 6.3 2.9 6.1 2.7 Other State and local................. 2.0 4.3 3.4 4.0 6.2 4.2 6.7 3.3 6.5 3.0 6.3 2.7 ----------------------------------------------------------------------------------------------------------- Total............................... 45.2 100.0 83.6 100.0 146.3 100.0 201.9 100.0 217.8 100.0 229.5 100.0 -------------------------------------------------------------------------------------------------------------------------------------------------------- \1\ Encompasses the cost of all services and supplies provided in physicians' offices, the cost for services of privately billing physicians in hospitals and other institutions, and the cost of diagnostic work performed in independent clinical laboratories. The salaries of staff physicians are counted with expenditures for the services of the employing institution. Note.--Numbers may not add to totals because of rounding. Source: Health Care Financing Administration, Office of the Actuary. TABLE C-12.--ANNUAL PERCENTAGE CHANGE IN SELECTED COMPONENTS OF THE CONSUMER PRICE INDEX FOR ALL URBAN CONSUMERS, \1\ 1963-99 ---------------------------------------------------------------------------------------------------------------- All items less Medical Physicians' Year All items medical care total services care ---------------------------------------------------------------------------------------------------------------- 1963........................................................... 1.3 1.0 2.6 2.2 1964........................................................... 1.3 1.3 2.1 2.5 1965........................................................... 1.6 1.6 2.4 3.7 1966........................................................... 2.9 3.1 4.4 5.6 1967........................................................... 3.1 2.1 7.2 7.2 1968........................................................... 4.2 4.2 6.0 5.6 1969........................................................... 5.5 5.4 6.7 7.0 1970........................................................... 5.7 5.9 6.6 7.5 1971........................................................... 4.4 4.1 6.2 7.0 1972........................................................... 3.2 3.2 3.3 3.0 1973........................................................... 6.2 6.4 4.0 3.4 1974........................................................... 11.0 11.2 9.3 9.2 1975........................................................... 9.1 9.0 12.0 12.1 1976........................................................... 5.8 5.3 9.5 11.4 1977........................................................... 6.5 6.3 9.6 9.1 1978........................................................... 7.6 7.6 8.4 8.4 1979........................................................... 11.3 11.5 9.2 9.1 1980........................................................... 13.5 13.6 11.0 10.5 1981........................................................... 10.3 10.4 10.7 11.0 1982........................................................... 6.2 5.9 11.6 9.4 1983........................................................... 3.2 2.9 8.8 7.8 1984........................................................... 4.3 4.1 6.2 6.9 1985........................................................... 3.6 3.4 6.3 5.9 1986........................................................... 1.9 1.5 7.5 7.2 1987........................................................... 3.6 3.5 6.6 7.3 1988........................................................... 4.1 3.9 6.5 7.2 1989........................................................... 4.8 4.6 7.7 7.4 1990........................................................... 5.4 5.2 9.0 7.1 1991........................................................... 4.2 3.9 8.7 6.0 1992........................................................... 3.0 2.8 7.4 6.3 1993........................................................... 3.0 2.7 5.9 5.6 1994........................................................... 2.6 2.5 4.8 4.4 1995........................................................... 2.8 2.7 4.5 4.5 1996........................................................... 3.0 2.8 3.5 3.6 1997........................................................... 2.3 2.3 2.8 3.0 1998........................................................... 1.6 1.5 3.2 3.0 1999........................................................... 2.2 2.1 3.5 2.8 ---------------------------------------------------------------------------------------------------------------- \1\ Consumer Price Index for All Urban Consumers, changes in annual averages. Source: U.S. Department of Labor, Bureau of Labor Statistics. TABLE C-13.--PHYSICIANS' AVERAGE NET INCOME \1\ AFTER EXPENSES BUT BEFORE TAXES, SELECTED YEARS 1983-97 [In thousands of dollars] -------------------------------------------------------------------------------------------------------------------------------------------------------- Percent Category 1983 1985 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 change 1996-97 -------------------------------------------------------------------------------------------------------------------------------------------------------- Specialty: General/family practice... $68.5 $77.9 $91.5 $94.6 $95.9 $102.7 $111.5 $114.4 $116.8 $121.4 $131.2 $139.1 $140.9 $1.3 Internal medicine......... 93.3 101.0 121.8 130.9 146.5 152.5 149.6 162.1 180.8 174.9 185.7 185.7 193.9 4.4 Surgery................... 145.5 155.4 187.9 207.5 220.5 236.4 233.8 250.5 262.7 255.2 269.4 275.2 261.4 -5.0 Pediatrics................ 70.7 77.1 85.3 94.9 104.7 106.5 119.3 123.9 135.4 126.2 140.5 140.6 143.5 2.1 Obstetrics/gynecology..... 119.9 122.7 163.2 180.7 194.3 207.3 221.8 220.7 221.9 200.4 244.3 231.0 228.7 -1.0 Radiology................. 148.0 150.8 180.7 188.5 210.5 219.4 229.8 257.3 259.8 237.4 244.4 275.1 273.4 -0.6 Psychiatry................ 80.0 88.6 102.7 111.4 111.7 116.5 127.6 132.1 131.3 128.5 137.2 133.7 135.7 1.5 Anesthesiology............ 144.7 140.2 163.1 194.5 185.8 207.4 221.1 231.1 224.1 218.1 215.1 228.4 236.2 3.4 Geographic area: New England............... 84.5 108.3 110.6 132.9 128.3 142.5 143.8 171.2 171.5 156.1 161.0 169.1 182.5 7.9 Middle Atlantic........... 98.6 107.9 126.1 135.0 152.5 156.1 171.0 172.4 185.3 177.8 207.0 200.3 193.0 -3.6 East North Central........ 114.3 118.9 137.6 147.0 155.6 172.4 174.1 187.1 199.2 191.9 198.8 199.8 199.3 -0.3 West North Central........ 110.5 113.7 133.9 138.0 159.2 151.4 164.2 187.5 198.2 183.8 184.6 212.6 215.9 1.6 South Atlantic............ 106.7 112.6 133.8 156.0 165.6 169.0 168.8 186.4 192.5 189.3 198.8 196.4 199.9 1.8 East South Central........ 114.9 115.0 141.2 164.8 173.0 169.0 179.4 180.0 195.0 199.2 216.0 229.6 234.7 2.2 West South Central........ 124.4 123.3 140.4 160.7 170.5 178.8 193.3 193.8 189.1 195.5 205.9 217.5 218.4 0.4 Mountain.................. 91.4 97.5 125.5 132.1 142.6 170.9 155.0 175.7 193.2 175.4 178.8 199.1 201.1 1.0 Pacific................... 103.1 113.6 135.4 136.0 148.1 162.5 172.4 178.1 181.2 171.8 189.9 184.6 180.9 -2.0 Employment status: Self-employed............. 115.9 124.5 146.2 160.0 175.3 185.6 191.0 202.3 218.0 210.2 230.8 231.6 228.2 -1.5 Employee.................. 77.6 83.8 99.6 113.0 119.2 119.8 134.0 136.1 150.7 148.2 152.5 159.2 154.0 -3.3 ------------------------------------------------------------------------------------------------------------------------- All physicians \2\.... 104.1 112.2 132.3 144.7 155.8 164.3 170.6 181.7 189.3 182.4 195.5 199.0 199.6 0.3 -------------------------------------------------------------------------------------------------------------------------------------------------------- \1\ Average net income after expenses but before taxes. These figures include contributions made into pension, profit-sharing, and deferred compensation plans. \2\ Includes physicians in specialties not reported separately. Source: American Medical Association (1998b and 1999). Growth in average net income for physicians in the Middle Atlantic and Pacific areas, well above average in 1995, experienced a decrease in 1996 and 1997. The West, in particular, has been associated with managed care growth and cost containment, so that region's position is not unexpected (American Medical Association, 1999). After several years of the lowest average net income, physicians in the New England States had the highest percent increase in 1997 and have passed the Pacific Division. The East South Central region remained the highest at $234,700 (table C-13). Physician net income varies more by specialty than across geographic areas. Radiologists had the highest average net incomes in 1997 ($273,400) and psychiatrists the lowest ($135,700). Incomes for general and family practitioners, however, continued to increase though the gain of 1.3 percent for 1997 was not as healthy as the 8.1 percent gain in 1995 and 6.0 percent in 1996. The largest gain from 1996 to 1997 was by specialists in internal medicine with an increase of 4.4 percent to $193,900. Income for surgeons fell by 5 percent from 1996 to 1997, the largest decline among all specialties (table C-13). Table C-14 shows median net income for physicians, the level below and above which lie half of all earnings. While average physician net income reached $199,600 in 1997, median income which may be more representative of the typical physician's earnings, fell 1.2 percent in 1997 to $164,000. Over the decade from 1987 to 1997, the average annual rate of increase in the median income for all physicians was 4.3 percent. Most of this growth had occurred by 1993. After adjusting for inflation, this represents a real growth of only 0.7 percent yearly. Table C-15 shows the distribution of physicians' net incomes in 1997 for all physicians and selected specialties. While the average net income of all physicians was $199,600. Half of all physicians earned $164,000 or less. One-fourth of all physicians earned $120,000 or less, while one-fourth earned $250,000 or more. Median incomes across all physician specialties remain far apart in 1997 with the median income for orthopedic surgery at $275,000. On the lower side, pediatrics and psychiatry reported median incomes of $120,000 and $130,000. The AMA's Physician Socioeconomic Statistics 1999-2000 reported that, on average, non-Federal patient care physicians received 42.8 percent of their incomes from private insurers. Medicare payments were 28.6 percent; Medicaid was a source of another 12 percent of doctor revenue. Patient out-of-pocket payments accounted for 12.2 percent (table C-16). The importance of each source varied by specialty, with physicians specializing in internal medicine receiving the highest percentage of revenue from Medicare. Pediatricians, on average, received only 1.1 percent of their income from Medicare, but received the highest percentage of income of any specialty group from Medicaid (25.5 percent). TABLE C-14.--MEDIAN PHYSICIAN NET INCOME, BY SELECTED CHARACTERISTICS, 1987, 1993, AND 1997 [In thousands of dollars] ---------------------------------------------------------------------------------------------------------------- Median net income Annualized percentage ------------------------ change 1987-97 Category --------------------------- real 1987 1993 1997 1987-97 1987-93 1993-97 percent ---------------------------------------------------------------------------------------------------------------- Primary care specialties............................ $90 $130 $140 4.5 6.3 1.9 1.0 Nonprimary care specialties......................... 125 180 195 4.5 6.2 2.1 1.0 Male................................................ 114 170 175 4.4 6.9 0.7 0.9 Female.............................................. 72 110 120 5.2 7.3 2.2 1.7 U.S. medical graduate............................... 110 158 170 4.4 6.2 1.8 0.9 International medical graduate...................... 100 150 150 4.1 7.0 0.0 0.6 Board certified..................................... 120 170 175 3.8 6.0 0.7 0.3 Not board certified................................. 90 124 138 4.4 5.5 2.7 0.8 Self employed....................................... 120 186 200 5.2 7.6 1.8 1.7 Employee............................................ 84 136 140 5.2 8.4 0.7 1.7 Independent contractor.............................. 100 150 165 5.1 7.0 2.4 1.6 Northeast........................................... 100 150 160 4.8 7.0 1.6 1.3 North Central....................................... 108 155 173 4.8 6.2 2.8 1.3 South............................................... 112 160 171 4.3 6.1 1.7 0.8 West................................................ 110 160 155 3.5 6.4 -0.8 0.0 ----------------------------------------------------------- All physicians.................................. 108 157 164 4.3 6.4 1.1 0.7 CPI (1982-84 = 100)............................. 113.6 144.5 160.5 3.5 4.1 2.7 NA ---------------------------------------------------------------------------------------------------------------- NA--Not available. Source: American Medical Association (1999). A Medical Economics Continuing Survey addressed physician gross income from health maintenance organizations (HMOs), preferred provider organizations (PPOs), and the amount in the form of capitation payments. According to the survey, the number of physicians participating in capitated plans increased to 44 percent in 1998 from 40 percent in 1996. Overall managed care participation by physicians has not increased since the last survey in 1996, however. In 1998, 76 percent of physicians participated in HMOs and 81 percent in PPOs. The median gross income from HMOs in 1998 for those physicians participating in HMOs was $66,200, up from $63,770 in 1995. For physicians in PPOs, the median gross income from PPOs for 1998 was $61,600, an increase from $48,660 in 1995 (Terry, 1999b). The share of gross income from payments from HMOs rose from 20 percent in 1995 to 25 percent in 1998. Over the same period the share from PPOs rose from 15 percent to 24 percent while the share from capitation rose from 15 percent to 20 percent (table C-17). TABLE C-15.--DISTRIBUTION OF PHYSICIAN NET INCOME AFTER EXPENSES BUT BEFORE TAXES BY SPECIALTY AND CENSUS DIVISION, 1997 [In thousands of dollars] ------------------------------------------------------------------------ 25th 75th Category Mean percentile Median percentile ------------------------------------------------------------------------ Specialty: General/family practice. $140.9 $100.0 $132.0 $160.0 Internal medicine....... 193.9 114.0 150.0 245.0 General............. 175.8 108.0 147.0 210.0 Cardiovascular 284.2 150.0 249.0 385.0 diseases........... Gastroenterology.... 221.5 150.0 175.0 300.0 Other............... 188.7 119.0 158.0 241.0 Surgery................. 261.4 150.0 217.0 325.0 General............. 244.4 150.0 203.0 302.0 Otolaryngology...... 230.2 170.0 206.0 289.0 Orthopedic.......... 331.0 205.0 275.0 420.0 Ophthalmology....... 222.1 121.0 175.0 300.0 Urological.......... 237.6 160.0 207.0 298.0 Other............... 326.5 186.0 270.0 396.0 Pediatrics.............. 143.5 100.0 120.0 178.0 Obstetrics/gynecology... 228.7 150.0 200.0 280.0 Radiology............... 273.4 190.0 260.0 350.0 Diagnostic.......... 275.5 190.0 265.0 330.0 Other............... 269.7 190.0 255.0 350.0 Psychiatry.............. 135.7 98.0 130.0 162.0 Anesthesiology.......... 236.2 175.0 220.0 288.0 Pathology............... 200.9 140.0 175.0 220.0 Other................... 190.3 120.0 170.0 230.0 Emergency medicine.. 197.0 145.0 195.0 230.0 Neurology........... 188.1 117.0 164.0 250.0 Dermatology......... 224.1 120.0 160.0 290.0 Other............... 157.4 100.0 137.0 200.0 Geographic area: New England............. 182.5 110.0 150.0 230.0 Middle Atlantic......... 193.0 120.0 160.0 240.0 East North Central...... 199.3 120.0 175.0 250.0 West North Central...... 215.9 130.0 170.0 264.0 South Atlantic.......... 199.9 112.0 166.0 250.0 East South Central...... 234.7 130.0 190.0 321.0 West South Central...... 218.4 124.0 173.0 257.0 Mountain................ 201.1 120.0 160.0 250.0 Pacific................. 180.9 115.0 150.0 222.0 ------------------------------------------- All physicians \1\.. 199.6 120.0 164.0 250.0 ------------------------------------------------------------------------ \1\ Includes physicians in specialties not listed separately. Source: American Medical Association (1999). TABLE C-16.--AVERAGE PERCENT OF NON-FEDERAL PHYSICIAN REVENUE BY SOURCE OF PAYMENT, 1998 ------------------------------------------------------------------------ Patient Category Medicare Medicaid Private out of insurance pocket ------------------------------------------------------------------------ Specialty: General/family practice..... 23.3 12.4 43.5 16.8 Internal medicine........... 43.9 8.0 35.7 9.0 Surgery..................... 35.4 7.6 42.8 12.1 Pediatrics.................. 1.1 25.5 55.5 12.6 Obstetrics/gynecology....... 11.0 20.3 54.1 13.0 Radiology................... 34.3 10.4 42.0 10.7 Psychiatry.................. 16.0 17.0 36.5 21.6 Anesthesiology.............. 27.8 12.6 47.6 9.0 Pathology................... 27.7 10.9 41.2 9.8 Other....................... 27.7 9.7 43.0 11.6 Geographic area: New England................. 32.0 10.1 40.7 12.3 Middle Atlantic............. 28.7 11.4 42.5 12.8 East North Central.......... 29.6 10.3 43.5 11.5 West North Central.......... 29.0 10.3 48.6 11.0 South Atlantic.............. 30.9 11.4 40.5 12.2 East South Central.......... 26.7 15.6 43.3 11.3 West South Central.......... 26.5 13.0 42.2 13.1 Mountain.................... 29.2 11.6 45.9 11.7 Pacific..................... 24.9 14.3 43.2 12.3 --------------------------------------- All physicians \1\...... 28.6 12.0 42.8 12.2 ------------------------------------------------------------------------ \1\ Includes physicians in specialties not listed separately. Source: American Medical Association (1999). SUPPLY OF HOSPITAL BEDS The national supply of community hospital beds per 1,000 population steadily increased from the 1940s, reaching a peak of 4.6 beds per 1,000 population in 1975. By 1997, the number of beds dropped to 3.2 per 1,000 population. Among the 9 Census regions, the East South Central experienced the largest increase from 1.7 per 1,000 population in 1940 to 4.7 in 1980. By 1997, this number had declined to 4.2, the same number as the West North Central region. In contrast, the New England, Mountain, and Pacific regions had fewer beds per 1,000 in 1997 than in 1940. In the period between 1990 and 1997, the New England and Mountain regions experienced the largest drops in average annual percent changes (-3.8 and -3.0, respectively). The East South Central region's average annual percent change was the smallest at -0.3 (table C-18). SUPPLY OF PHYSICIANS Physician shortages in the 1950s and 1960s led to Federal and State initiatives to increase the supply of physicians. Since that time, however, the number of physicians in the United States has grown rapidly from 334,028 in 1970 to 777,859 in 1998, a rate over four times faster than that of the total population. TABLE C-17.--PHYSICIAN GROSS INCOME FROM MANAGED CARE AND CAPITATION BY SPECIALTY, 1998 ---------------------------------------------------------------------------------------------------------------- Median 1998 gross income \1\ Percent of 1998 gross from: income \1\ from: Physician specialty ----------------------------------------------------------- HMOs PPOs Capitation HMOs PPOs Capitation ---------------------------------------------------------------------------------------------------------------- Anesthesiologists................................... $82,800 $64,100 $41,240 38 28 24 Cardiologists....................................... 69,100 65,600 45,000 19 19 14 Cardio/thoracic surgeons............................ 89,700 48,600 49,990 24 14 14 Family practitioners................................ 66,800 52,700 49,950 26 24 22 Gastroenterologists................................. 70,500 76,100 30,000 22 23 12 General practitioners............................... 46,400 28,900 34,990 24 18 23 General surgeons.................................... 66,600 51,500 60,000 24 19 20 Internists.......................................... 52,700 54,000 39,990 23 22 18 Obstetrics/gynecology specialists................... 109,500 96,600 37,490 36 32 15 Ophthalmologists.................................... 89,400 86,900 49,990 22 20 15 Orthopedic surgeons................................. 92,000 98,700 60,000 21 24 14 Pediatricians....................................... 64,100 73,300 54,980 35 35 28 Plastic surgeons.................................... (\2\) 87,500 80,000 18 19 21 Psychiatrists....................................... 41,100 32,100 53,970 24 20 27 ----------------------------------------------------------- All surgical specialists........................ 85,400 79,800 49,990 28 24 18 All nonsurgeons................................. 58,400 53,300 42,490 24 23 20 All fields...................................... 66,200 61,600 44,980 25 24 20 ---------------------------------------------------------------------------------------------------------------- \1\ Gross is the individual physician's share of 1998 practice receipts before professional expenses and income taxes. Figures exclude physicians with no HMO, PPO, or capitation contracts. \2\ Insufficient sample. Neurosurgeons also yielded an insufficient sample. Source: Terry (1999b). Table C-19 also indicates that between 1970 and 1998, the number of all physicians per 100,000 civilians grew from 161 to 286, a 78 percent increase. Table C-20 shows variations in the supply of non-Federal physicians relative to population by State. In 1998, the District of Columbia had the highest ratio (783 physicians per 100,000 population) while Idaho had the lowest ratio (176 physicians per 100,000 population). While concern continues about the possible oversupply of physicians and its effect on efforts to control health care spending, the Council on Graduate Medical Education's (1999; COGME) Fourteenth Report found that there has been progress toward meeting the Nation's physician work force goals. There has been a slight moderation in the rate of growth in physician supply, the number of physicians in training has leveled off, and the number of new entrants, particularly international medical graduates (IMGs), has decreased moderately over the past 5 years. The American Medical TABLE C-18.--COMMUNITY HOSPITAL BEDS PER 1,000 POPULATION AND AVERAGE ANNUAL PERCENT CHANGE BY REGION AND STATE, SELECTED YEARS 1940-97 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Beds per 1,000 civilian population Average annual percent change Region and State ----------------------------------------------------------------------------------------------------------------------------------- 1940 \1\ 1950 \1\ 1960 \2\ 1970 1980 1990 \3\ 1997 \3\ 1940-60 \1\ \2\ 1960-70 \2\ 1970-80 1980-90 \3\ 1990-97 \3\ ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ New England................................................. 4.4 4.2 3.9 4.1 4.1 3.4 2.6 -0.6 0.5 0.0 -1.9 -3.8 Maine..................................................... 3.0 3.2 3.4 4.7 4.7 3.7 3.0 0.6 3.3 0.0 -2.1 -2.9 New Hampshire............................................. 4.2 4.2 4.4 4.0 3.9 3.1 2.5 0.2 -0.9 -0.3 -2.3 -3.0 Vermont................................................... 3.3 4.0 4.5 4.5 4.4 3.0 2.7 1.6 0.0 -0.2 -3.4 -1.5 Massachusetts............................................. 5.1 4.8 4.2 4.4 4.4 3.6 2.8 -1.0 0.5 0.0 -2.0 -3.5 Rhode Island.............................................. 3.9 3.8 3.7 4.0 3.8 3.2 2.6 -0.3 0.8 -0.5 -1.7 -2.9 Connecticut............................................... 3.7 3.6 3.4 3.4 3.5 2.9 2.2 -0.4 0.0 0.3 -1.9 -3.8 Middle Atlantic............................................. 3.9 3.8 4.0 4.4 4.6 4.1 3.8 0.1 1.0 0.4 -0.9 -1.1 New York.................................................. 4.3 4.1 4.3 4.6 4.5 4.1 3.9 0.0 0.7 -0.2 -0.7 -0.7 New Jersey................................................ 3.5 3.2 3.1 3.6 4.2 3.7 3.5 -0.6 1.5 1.6 -1.3 -2.0 Pennsylvania.............................................. 3.5 3.8 4.1 4.7 4.8 4.4 3.8 0.8 1.4 0.2 -0.9 -2.0 East North Central.......................................... 3.2 3.2 3.6 4.4 4.7 3.9 3.2 0.6 2.0 0.7 -1.8 -2.7 Ohio...................................................... 2.7 2.9 3.4 4.2 4.7 4.0 3.2 1.2 2.1 1.1 -1.8 -3.1 Indiana................................................... 2.3 2.6 3.1 4.0 4.5 3.9 3.3 1.5 2.6 1.2 -1.4 -2.3 Illinois.................................................. 3.4 3.6 4.0 4.7 6.1 4.0 3.4 0.8 1.6 0.8 -2.4 -2.2 Michigan.................................................. 4.0 3.3 3.3 4.3 4.4 3.7 2.9 -1.0 2.7 0.2 -1.7 -3.3 Wisconsin................................................. 3.4 3.7 4.3 5.2 4.9 3.8 3.2 1.2 1.9 -0.8 -2.5 -2.4 West North Central.......................................... 3.1 3.7 4.3 6.7 6.8 4.9 4.2 1.6 2.9 0.2 -1.7 -1.6 Minnesota................................................. 3.9 4.4 4.8 6.1 5.7 4.4 3.6 1.0 2.4 -0.7 -2.6 -2.8 Iowa...................................................... 2.7 3.2 3.9 5.6 5.7 5.1 4.3 1.9 3.7 0.2 -1.1 -2.4 Missouri.................................................. 2.9 3.3 3.9 5.1 5.7 4.8 3.9 1.5 2.7 1.1 -1.7 -2.9 North Dakota.............................................. 3.5 4.3 5.2 6.8 7.4 7.0 6.1 2.0 2.7 0.8 -0.6 -2.0 South Dakota.............................................. 2.8 4.4 4.5 5.6 5.5 6.1 6.0 2.4 2.2 -0.2 1.0 -0.7 Nebraska.................................................. 3.4 4.2 4.4 6.2 6.0 5.5 4.7 1.3 3.5 -0.3 -1.0 -2.2 Kansas.................................................... 2.8 3.4 4.2 5.4 5.8 4.8 4.2 2.0 2.5 0.7 -1.9 -1.8 South Atlantic.............................................. 2.5 2.8 3.3 4.0 4.5 3.7 3.2 1.4 1.9 1.2 -1.9 -2.0 Delaware.................................................. 4.4 3.9 3.7 3.7 3.6 3.0 2.6 -0.9 0.0 -0.3 -1.8 -2.0 Maryland.................................................. 3.9 3.6 3.3 3.1 3.6 2.8 2.5 -0.8 -0.6 1.5 -2.1 -1.6 District of Columbia...................................... 5.5 5.5 5.9 7.4 7.3 7.6 6.8 0.4 2.3 -0.1 0.3 -1.5 Virginia.................................................. 2.2 2.5 3.0 3.7 4.1 3.3 2.7 1.6 2.1 1.0 -2.1 -2.8 West Virginia............................................. 2.7 3.1 4.1 5.4 5.5 4.7 4.5 2.1 2.8 0.2 -1.6 -0.6 North Carolina............................................ 2.2 2.6 3.4 3.8 4.2 3.3 3.1 2.2 1.1 1.0 -2.1 -0.9 South Carolina............................................ 1.8 2.4 2.9 3.7 3.9 3.3 3.2 2.4 2.5 0.5 -1.7 -0.4 Georgia................................................... 1.7 2.0 2.8 3.8 4.6 4.0 3.4 2.5 3.1 1.9 -1.4 -2.2 Florida................................................... 2.8 2.9 3.1 4.4 5.1 3.9 3.4 0.5 3.6 1.5 -2.4 -1.9 East South Central.......................................... 1.7 2.1 3.0 4.4 4.7 4.3 4.2 3.9 1.5 -0.6 -2.2 -0.3 Kentucky.................................................. 1.8 2.2 3.0 4.0 4.5 4.3 3.9 2.6 2.9 1.2 -0.2 -3.4 Tennessee................................................. 1.9 2.3 3.4 4.7 5.5 4.8 3.9 3.0 3.3 1.6 -1.1 -2.9 Alabama................................................... 1.5 2.0 2.8 4.3 5.1 4.6 4.3 3.2 4.4 1.7 -1.0 -0.9 Mississippi............................................... 1.4 1.7 2.9 4.4 5.3 5.0 4.7 3.7 4.3 1.9 0.0 -0.9 West South Central.......................................... 2.1 2.7 3.3 4.3 4.7 3.8 3.2 2.3 2.7 0.9 -1.8 -2.4 Arkansas.................................................. 1.4 1.6 2.9 4.2 5.0 4.6 4.0 3.7 3.6 1.8 -0.6 -1.9 Louisiana................................................. 3.1 3.8 3.9 4.2 4.8 4.6 4.3 1.2 0.7 1.3 -0.4 -0.9 Oklahoma.................................................. 1.9 2.5 3.2 4.5 4.6 4.0 3.3 2.6 3.5 0.2 -1.4 -2.7 Texas..................................................... 2.0 2.7 3.3 4.3 4.7 3.5 2.9 2.5 2.7 0.9 -2.9 -2.6 Mountain.................................................... 3.6 3.8 3.5 4.3 3.8 3.1 2.5 -0.1 2.1 -1.2 -2.0 -3.0 Montana................................................... 4.9 5.3 5.1 5.8 5.9 5.8 5.1 0.2 1.3 0.2 -0.2 -1.8 Idaho..................................................... 2.6 3.4 3.2 4.0 3.7 3.2 2.9 1.0 2.3 -0.8 -1.4 -1.4 Wyoming................................................... 3.5 3.9 4.6 5.5 3.6 4.8 4.1 1.4 1.8 -4.1 3.1 -2.2 Colorado.................................................. 3.9 4.2 3.8 4.6 4.2 3.2 2.3 -0.1 1.9 -0.9 -2.7 -4.5 New Mexico................................................ 2.7 2.2 2.9 3.5 3.1 2.8 2.1 0.4 1.9 -1.2 -0.7 -3.9 Arizona................................................... 3.4 4.0 3.0 4.1 3.6 2.7 2.3 -0.6 3.2 1.3 -2.8 -2.2 Utah...................................................... 3.2 2.9 2.8 3.6 3.1 2.6 2.0 -0.7 2.5 -1.5 -1.7 -3.6 Nevada.................................................... 5.0 4.4 3.9 4.2 4.2 2.8 2.1 -1.2 0.7 0.0 -3.6 -3.9 Pacific..................................................... 4.1 3.2 3.1 3.7 3.5 2.7 2.2 -1.4 1.8 -0.6 -2.6 -2.8 Washington................................................ 3.4 3.6 3.3 3.5 3.1 2.5 1.9 -0.1 0.6 -1.2 -2.1 -3.8 Oregon.................................................... 3.5 3.1 3.5 4.0 3.5 2.8 2.2 0.0 1.3 -1.3 -1.9 -3.3 California................................................ 4.4 3.3 3.0 3.8 3.6 2.7 2.3 -1.9 2.4 -0.5 -2.8 -2.2 Alaska.................................................... ........ ........ 2.4 2.3 2.7 2.3 2.4 ............... -0.4 1.6 -1.6 0.6 Hawaii.................................................... ........ ........ 3.7 3.4 3.1 2.7 2.3 ............... -0.8 -0.9 -1.0 -2.2 ----------------------------------------------------------------------------------------------------------------------------------- United States......................................... 3.2 3.3 3.6 4.3 4.5 3.7 3.2 0.6 1.8 0.5 -1.7 -2.0 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ \1\ 1940 and 1950 data are estimated based on published figures. \2\ 1960 includes hospital units of institutions. \3\ Starting with 1990, excludes hospital units of institutions. Note.--Data for 1990 has been revised. Source: U.S. Public Health Service (1997). The 1997 data is from Hospital Statistics, 1999 edition, American Hospital Association. TABLE C-19.--PHYSICIAN SUPPLY BY MAJOR CATEGORIES, SELECTED YEARS 1970-98 ---------------------------------------------------------------------------------------------------------------- 1970 1980 1990 1998 Category ------------------------------------------------------------------------------- Number Percent Number Percent Number Percent Number Percent ---------------------------------------------------------------------------------------------------------------- Federal......................... 29,501 9 17,787 4 20,475 3 18,991 2 Non-Federal..................... 301,323 90 443,502 96 592,166 97 776,921 100 Patient care.................... 278,535 83 376,512 80 503,870 82 621,736 80 Nonpatient care................. 32,310 10 38,404 9 43,440 8 45,264 6 Primary care.................... 134,354 40 170,705 37 213,514 35 264,177 34 Primary care specialties........ 3,161 1 16,642 4 30,911 5 45,740 6 Male............................ 308,627 92 413,395 88 511,227 83 600,829 77 Female.......................... 25,401 8 54,284 12 104,194 17 177,030 23 U.S. graduates.................. 270,637 81 362,307 77 475,394 77 582,315 75 International medical graduates. 57,217 17 97,726 21 131,764 21 185,246 24 Canadian graduates.............. 6,174 2 7,646 2 8,263 1 10,298 1 ------------------------------------------------------------------------------- Total physicians \1\.... 334,028 100 467,679 100 615,421 100 777,859 100 =============================================================================== Total physician- 161 202 244 286 population ratio (per 100,000 persons)....... ---------------------------------------------------------------------------------------------------------------- \1\ Address unknown excluded from all Federal/non-Federal categories, not-classified, inactive, and address unknown are excluded from patient care/nonpatient care categories. Note.--Totals may not equal sum of rounded components. Source: American Medical Association (2000). TABLE C-20.--NON-FEDERAL PHYSICIAN/POPULATION RATIOS \1\ AND RANK BY STATE, SELECTED YEARS 1970-98 ---------------------------------------------------------------------------------------------------------------- 1998 State 1970 1975 1985 1990 1995 1998 rank ---------------------------------------------------------------------------------------------------------------- Alabama........................................................ 90 103 152 170 202 213 42 Alaska......................................................... 74 95 137 155 164 177 50 Arizona........................................................ 144 185 220 233 239 236 32 Arkansas....................................................... 92 103 150 165 192 209 43 California..................................................... 194 219 266 272 275 278 13 Colorado....................................................... 178 186 216 232 257 266 17 Connecticut.................................................... 192 224 302 332 372 388 5 Delaware....................................................... 134 155 203 217 246 258 22 District of Columbia........................................... 390 467 607 658 714 783 1 Florida........................................................ 155 185 236 251 269 283 11 Georgia........................................................ 108 126 172 187 214 228 35 Hawaii......................................................... 160 185 239 266 283 298 10 Idaho.......................................................... 94 104 133 142 162 176 51 Illinois....................................................... 138 164 217 229 265 281 12 Indiana........................................................ 102 116 156 171 200 214 41 Iowa........................................................... 103 113 149 167 189 197 45 Kansas......................................................... 118 137 179 195 223 229 34 Kentucky....................................................... 102 122 162 181 211 226 37 Louisiana...................................................... 120 131 187 200 241 263 20 Maine.......................................................... 111 133 193 208 235 257 24 Maryland....................................................... 183 217 334 360 384 404 4 Massachusetts.................................................. 207 237 331 364 420 443 2 Michigan....................................................... 125 145 190 201 232 244 28 Minnesota...................................................... 151 172 223 240 267 276 14 Mississippi.................................................... 84 94 126 144 155 178 49 Missouri....................................................... 129 148 195 209 236 247 27 Montana........................................................ 104 116 155 181 214 222 39 Nebraska....................................................... 116 134 170 185 220 240 30 Nevada......................................................... 114 129 173 175 178 193 47 New Hampshire.................................................. 140 162 207 227 248 270 15 New Jersey..................................................... 146 174 243 267 302 318 8 New Mexico..................................................... 113 130 184 206 229 238 31 New York....................................................... 236 258 318 339 391 414 3 North Carolina................................................. 111 132 185 209 239 256 25 North Dakota................................................... 96 106 168 184 224 242 29 Ohio........................................................... 133 147 199 213 242 257 23 Oklahoma....................................................... 103 113 149 160 177 186 48 Oregon......................................................... 144 171 215 233 250 261 21 Pennsylvania................................................... 152 169 234 256 301 317 9 Rhode Island................................................... 160 194 248 277 328 365 6 South Carolina................................................. 93 114 161 177 212 227 36 South Dakota................................................... 81 90 143 154 187 203 44 Tennessee...................................................... 119 139 189 210 247 265 19 Texas.......................................................... 117 135 174 188 206 222 38 Utah........................................................... 138 155 185 200 216 221 40 Vermont........................................................ 187 207 268 288 316 349 7 Virginia....................................................... 125 149 214 233 253 265 18 Washington..................................................... 149 168 223 241 259 268 16 West Virginia.................................................. 104 124 171 183 216 235 33 Wisconsin...................................................... 120 137 188 207 239 251 26 Wyoming........................................................ 101 108 140 156 176 196 46 ------------------------------------------------ United States \1\.......................................... 148 169 220 237 264 280 ..... ---------------------------------------------------------------------------------------------------------------- \1\ The ratios are for non-Federal physicians per 100,000 civilian population. Excludes counts of physicians in U.S. possessions and with unknown addresses. Source: American Medical Association (2000). Association also reports that the number of applicants to medical school declined for the second consecutive year, from 43,020 in 1997 to 41,004 in 1998. Developments that have a potential impact on the supply, demand, and training of physicians in the coming years include an increasingly competitive marketplace for health services, provisions in the 1997 Balanced Budget Act; expanded State graduate medical education financing activities, the growth in the supply of nonphysician clinicians, and new graduate medical education policies at the Department of Veterans Affairs. Questions also remain as to whether there are too many specialists and too few primary care physicians to meet the Nation's future health care needs. Concerned that shortages of generalist physicians were limiting access to basic medical services in many areas of the country, COGME, the Physician Payment Review Commission, the Macy Foundation, and the PEW Commission recommended in earlier reports that the proportion of generalist physicians should be significantly increased. Three of the four entities recommend an increase to a 50 : 50 ratio of generalists to specialists (Traxler, 2000). In March 1999, COGME's Fourteenth Report indicated that ``significant progress'' had been made in increasing the number of physicians entering generalist specialities. The percent of U.S. medical school graduates in the National Residency Match Program selecting generalist specialties increased from 44 percent in 1991 to 56 percent in 1997. In 1998, about 40 percent of physicians were in primary care specialties and subspecialties, defined as general and family practice, internal medicine, obstetrics/gynecology, and pediatrics (table C-21 for number of physicians by specialty). The American Medical Association's Annual Survey of Graduate Medical Education Programs for 1998-99, however, reports a stop in the growth of resident enrollment in primary care specialties for the first time in several years (JAMA, 1999). Data from the 2000 National Resident Matching Program also indicate that for the third straight year, fewer U.S. medical school seniors chose primary care residency positions in family practice, pediatrics, internal medicine and obstetrics and gynecology (Greene, 2000). Though it remains to be seen whether the primary care specialties will resume their growth, according to Medical Economics TABLE C-21.--PHYSICIANS: TOTAL AND BY SPECIALTY, PERCENT DISTRIBUTION, AND PERCENT GROWTH, 1970, 1980, 1990, AND 1998 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ 1970 1980 1990 1998 Percent change ----------------------------------------------------------------------------------------------------------------------------------- Specialty Percent Percent Percent Percent Total distribution Total distribution Total distribution Total distribution 1970-80 1980-90 1990-98 1970-98 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Aerospace medicine.......................................... 1,188 0.4 587 0.1 687 0.1 532 0.1 -50.6 17.0 -22.5 -55.2 Allergy/immunology.......................................... 1,719 0.5 1,518 0.3 3,388 0.6 3,833 0.5 -11.7 123.2 13.1 123.0 Anesthesiology.............................................. 10,860 3.3 15,958 3.4 25,981 4.2 33,947 4.4 46.9 62.8 30.7 212.6 Cardiovascular diseases..................................... 6,476 1.9 9,823 2.1 15,862 2.6 19,623 2.5 51.7 61.5 23.7 203.0 Child psychiatry............................................ 2,090 0.6 3,217 0.7 4,343 0.7 5,756 0.7 56.5 32.8 32.5 175.4 Colon/rectal surgery........................................ 667 0.2 719 0.2 882 0.1 1,049 0.1 7.8 22.7 18.9 57.3 Dermatology................................................. 4,003 1.2 5,660 1.2 7,557 1.2 9,239 1.2 41.4 33.5 22.2 130.8 Diagnostic radiology........................................ 1,968 0.6 7,048 1.5 15,412 2.5 20,491 2.6 258.1 118.7 32.9 941.2 Emergency medicine \1\...................................... 0 (\1\) 5,699 1.2 14,243 2.3 21,233 2.7 (\1\) 149.9 49.1 (\1\) Family practice \2\......................................... 0 (\2\) 27,530 5.9 47,639 7.7 66,900 8.6 (\2\) 73.0 40.4 (\2\) Forensic pathology.......................................... 200 0.1 240 0.1 414 0.1 529 0.1 20.0 72.5 27.7 164.5 Gastroenterology............................................ 2,010 0.6 4,046 0.9 7,493 1.2 9,903 1.3 101.3 85.2 32.2 392.7 General practice............................................ 57,948 17.3 32,519 7.0 22,841 3.7 16,385 2.1 -43.9 -29.8 -28.3 -71.7 General preventive medicine................................. 804 0.2 810 0.2 1,036 0.2 1,688 0.2 0.7 27.9 62.9 109.9 General surgery............................................. 29,761 8.9 34,034 7.3 38,376 6.2 40,448 5.2 14.4 12.8 5.4 35.9 Internal medicine........................................... 41,872 12.5 71,531 15.3 98,349 16.0 127,574 16.4 70.8 37.5 29.7 204.7 Medical genetics \3\........................................ 0 (\3\) 0 (\3\) 0 (\3\) 290 0.1 (\3\) (\3\) 62.0 (\3\) Neurology................................................... 3,074 0.9 5,685 1.2 9,237 1.5 12,061 1.6 84.9 62.5 30.6 292.3 Neurological surgery........................................ 2,578 0.8 3,341 0.7 4,358 0.7 4,964 0.6 29.6 30.4 13.9 92.5 Nuclear medicine \1\........................................ 0 (\1\) 0 (\1\) 1,340 0.2 1,415 0.2 (\1\) (\1\) 5.6 (\1\) Obstetrics/gynecology....................................... 18,876 5.7 26,305 5.6 33,697 5.5 39,512 5.1 39.4 28.1 17.2 109.3 Occupational medicine....................................... 2,713 0.8 2,358 0.5 2,744 0.4 3,017 0.4 -13.1 16.4 9.9 11.2 Ophthalmology............................................... 9,927 3.0 12,974 2.8 16,073 2.6 18,035 2.3 30.7 20.8 12.2 81.7 Orthopedic surgery.......................................... 9,620 2.9 13,996 3.0 19,138 3.1 23,178 3.4 45.5 36.7 21.1 140.9 Otolaryngology.............................................. 5,409 1.6 6,553 1.4 8,138 1.3 9,255 1.2 21.1 24.2 13.7 71.1 Pathology-anatomic/clin..................................... 10,283 3.1 13,402 2.9 16,170 2.6 18,046 2.3 30.3 20.7 11.6 75.5 Pediatrics.................................................. 18,332 5.5 28,803 6.2 40,893 6.6 57,038 7.3 57.1 42.0 39.5 211.1 Pediatric cardiology........................................ 487 0.1 659 0.1 1,006 0.2 1,371 0.2 35.3 52.7 36.3 181.5 Physical medicine/rehabilitation............................ 1,479 0.4 2,146 0.5 4,105 0.7 6,027 0.8 45.1 91.3 46.8 307.5 Plastic surgery............................................. 1,600 0.5 2,980 0.6 4,590 0.7 6,095 0.8 86.3 54.0 32.8 280.9 Psychiatry.................................................. 21,146 6.3 27,481 5.9 35,163 5.7 39,494 5.0 30.0 28.0 12.3 86.8 Public health............................................... 3,029 0.9 2,316 0.5 2,015 0.3 1,641 0.2 -23.5 -13.0 -18.6 -45.8 Pulmonary diseases.......................................... 2,315 0.7 3,715 0.8 6,080 1.0 7,810 1.0 60.5 63.7 28.4 237.4 Radiology................................................... 10,524 3.2 11,653 2.5 8,492 1.4 8,272 1.1 10.7 -27.1 -2.6 -21.4 Radiation oncology.......................................... 868 0.3 1,581 0.3 2,821 0.5 3,676 0.5 82.1 78.4 30.3 323.5 Thoracic surgery............................................ 1,809 0.5 2,133 0.5 2,063 0.3 443 0.1 17.9 -3.3 -78.5 -75.5 Urological surgery.......................................... 5,795 1.7 7,743 1.7 9,372 1.5 10,168 1.3 33.6 21.0 8.5 75.4 Other specialty............................................. 6,929 2.1 5,810 1.2 7,254 1.2 6,068 0.8 -16.1 24.9 -16.3 -12.4 Unspecified................................................. 12,486 3.7 12,289 2.6 8,058 1.3 9,994 1.3 -1.6 -34.4 -24.0 -19.9 Inactive.................................................... 19,621 5.9 25,744 5.5 52,653 8.6 69,889 9.0 31.2 104.5 32.7 256.2 Not classified \4\.......................................... 0 (\4\) 20,629 4.4 12,678 2.1 40,032 5.1 (\4\) -38.5 215.8 (\4\) Address unknown............................................. 3,204 1.0 6,390 1.4 2,780 0.5 938 0.1 99.4 -56.5 -66.2 -70.7 ----------------------------------------------------------------------------------------------------------------------------------- Total physicians........................................ 334,028 100.0 467,679 100.0 615,421 100.0 777,859 100.0 40.0 31.6 26.4 132.9 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ \1\ Data were not available for emergency medicine prior to 1980 and nuclear medicine prior to 1985. \2\ Data on family practice were not available prior to 1975. \3\ Data on medical genetics were not available prior to 1994. \4\ Not classified was established in 1970 but complete data were not available until 1972. Note.--Data for 1990 are as of January 1. Data for all other years are as of December 31. The total for 1970 includes 358 not classified physicians. Source: American Medical Association (2000). (Terry, 1999a), some U.S. health care markets are becoming saturated with primary care doctors. The demand for specialist services under managed care is also increasing due to the growth of point-of-service plans and the expansion of patient rights as consumers push for greater access. In 1998, there were 97,383 residents in training. This figure, which had leveled off over the last several years, decreased in 1998 by 760 from the previous year. The number of U.S. medical school graduates, which rose rapidly in the late 1960s and early 1970s, has been relatively stable since 1980 (table C-22). TABLE C-22.--MEDICAL SCHOOL GRADUATES, FIRST-YEAR RESIDENTS AND TOTAL RESIDENTS, 1965-98 ------------------------------------------------------------------------ Medical First- Year school year Total graduates residents residents ------------------------------------------------------------------------ 1965................................... 7,409 9,670 31,898 1966................................... 7,574 10,316 31,898 1967................................... 7,743 10,419 33,743 1968................................... 7,973 10,464 35,047 1969................................... 8,059 10,808 37,139 1970................................... 8,367 11,552 39,463 1971................................... 8,974 12,066 42,512 1972................................... 9,551 11,500 45,081 1973................................... 10,391 11,031 49,082 1974................................... 11,613 11,628 52,685 1975................................... 12,714 13,200 54,500 1976................................... NA 14,258 56,872 1977................................... 13,607 15,900 59,000 1978................................... 14,393 16,800 63,163 1979................................... 14,966 17,600 64,615 1980................................... 15,135 18,702 61,465 1981................................... 15,667 18,389 69,738 1982................................... 15,985 18,976 69,142 1983................................... 15,824 18,794 73,000 1984................................... 16,327 19,539 75,125 1985................................... 16,319 19,168 75,514 1986................................... 16,125 18,183 76,815 1987................................... 15,836 18,067 81,410 1988................................... 15,887 17,941 81,093 1989................................... 15,620 18,131 82,000 1990................................... 15,336 18,322 82,902 1991................................... 15,481 19,497 86,217 1992................................... 15,386 19,794 88,620 1993................................... 15,512 21,616 96,469 1994................................... 15,579 19,293 97,832 1995................................... 15,911 21,372 98,035 1996................................... 15,902 21,394 98,076 1997................................... 15,953 21,808 98,143 1998................................... 16,143 21,732 97,383 ------------------------------------------------------------------------ NA--Not available. Source: American Medical Association (various years). International medical graduates (IMGs) comprised 17 percent of total physicians in 1970. By 1998, this had risen to 24 percent of the total physician population (table C-19). The number of residency positions occupied by IMGs fluctuated over the period 1971-95. Due to stricter immigration laws and more rigorous competency requirements, IMGs dropped from 41 percent of all residents in 1971 to about 17 percent in 1985. Since then the number of IMGs in training in the United States has more than doubled, from 12,509 in 1985 to 25,531 in 1997 (26 percent of all residents in training). In 1998, however, the total number of IMG residents decreased slightly (table C-23). Also, according to the American Medical Association, the number of IMGs entering graduate medical education has dropped 13.2 percent since 1993. COGME predicts that a new examination effective July 1998, which tests IMGs for both clinical and spoken English language proficiency, may further reduce the number of IMGs applying for and entering residency training. TABLE C-23.--INTERNATIONAL MEDICAL GRADUATE RESIDENTS \1\ BY CITIZENSHIP, SELECTED YEARS 1971-98 ------------------------------------------------------------------------ Percent Total of all U.S. Foreign residents citizens nationals ------------------------------------------------------------------------ 1971........................ 17,515 41 1,063 16,452 1976........................ 16,634 29 1,783 14,851 1981........................ 11,596 17 2,908 8,688 1983........................ 14,084 19 4,961 9,123 1985........................ 12,509 17 6,868 5,609 1991........................ 17,017 20 5,107 11,910 1992........................ 19,084 22 5,015 \2\ 14,06 9 1993........................ 22,706 24 5,056 17,650 1994........................ 23,499 24 4,285 19,214 1995........................ 24,982 25 4,030 20,952 1996........................ 24,703 25 3,817 20,886 1997........................ 25,531 26 3,979 21,552 1998........................ 25,415 26 4,350 21,065 ------------------------------------------------------------------------ \1\ International medical graduates are defined by location of education. \2\ Includes 6,192 permanent resident aliens. Source: American Medical Association (various years). HEALTH INSURANCE STATUS IN 1998 Most people have some form of health insurance. In 1998, an estimated 83.7 percent of the total noninstitutionalized population had public or private coverage during at least part of the year. However, an estimated 44.3 million Americans, or 16.3 percent of the population, were without coverage in 1998. Almost all of the uninsured were under age 65; consequently, 18.4 percent of the nonelderly population were uninsured. This section examines characteristics of both the insured and the uninsured populations in 1998, and reviews trends in health insurance coverage over the 1979-98 period (Smith, 1999). Estimates of health insurance coverage in 1998 are based on analysis of the March 1999 Current Population Survey (CPS), a household survey by the Department of Commerce's Census Bureau. Each year's March CPS asks whether individuals had coverage from selected sources of health insurance at any time during the preceding calendar year. Thus, the March 1999 CPS reflects respondents' recollections of coverage during all of 1998. \1\ --------------------------------------------------------------------------- \1\ Some analysts have suggested that respondents may actually be reporting their coverage status at the time of the survey, rather than for the previous year. --------------------------------------------------------------------------- Health Insurance Coverage and Selected Population Characteristics Age Table C-24 provides a breakdown of health insurance coverage by type of insurance and age. In 1998, young adults ages 19 to 24 were the least likely to have health insurance. While 56 percent of this group were covered under an employment-based plan, almost one-third (32 percent) had no health insurance. These young adults comprised 8 percent of the U.S. population, but 16 percent of the uninsured population. These individuals are often too old to be covered as dependents on their parents' policies, and as entry-level workers they do not have strong ties to the work force; some may choose to remain uninsured and spend their money on other items. After age 25, the percentage of people with health insurance increases. Of those age 65 and older, 96 percent were covered by Medicare and/or Medicaid, and 1 percent were uninsured. The remainder of this section focuses on the population under age 65. TABLE C-24.--HEALTH INSURANCE COVERAGE BY TYPE OF INSURANCE AND AGE, 1998 ---------------------------------------------------------------------------------------------------------------- Type of insurance \1\ (in percent) Population -------------------------------------------------------------------- Age (in Medicare millions) Employment and/or Private Military \3\ Other Uninsured based \2\ Medicaid nongroup public \4\ ---------------------------------------------------------------------------------------------------------------- Under 5........................ 19.6 60.5 23.9 4.5 3.1 1.3 15.4 5-18........................... 56.4 65.8 17.1 5.3 3.1 1.0 15.7 19-24.......................... 22.0 55.6 9.3 5.9 3.0 0.6 31.7 25-34.......................... 38.5 66.0 6.6 5.3 2.6 0.4 23.7 35-54.......................... 80.0 73.6 6.5 7.2 3.1 0.4 15.7 55-61.......................... 16.9 68.8 10.4 11.0 4.7 0.4 14.9 62-64.......................... 6.0 61.4 18.0 13.9 4.8 0.5 15.2 65 and older................... 32.4 34.9 96.0 31.8 3.7 1.2 1.1 -------------------------------------------------------------------------------- Total.................... 271.7 63.3 21.4 9.6 3.2 0.7 16.3 ---------------------------------------------------------------------------------------------------------------- \1\ People may have more than one source of health insurance; percentages may total to more than 100. \2\ Group health insurance through employer or union. \3\ Military health care or veterans coverage. \4\ State programs for low-income individuals. Source: Congressional Research Service analysis of data from the March 1999 Current Population Survey. Other demographic characteristics Table C-25 shows the rate of health insurance coverage by type of insurance and selected demographic characteristics-- race, family type, region, poverty level, and citizenship--for people under age 65. In 1998 whites were most likely to have health insurance (86 percent) while Hispanics were least likely (63 percent). Hispanics TABLE C-25.--HEALTH INSURANCE COVERAGE BY TYPE OF INSURANCE AND DEMOGRAPHIC CHARACTERISTICS FOR PEOPLE UNDER AGE 65, 1998 ---------------------------------------------------------------------------------------------------------------- Type of insurance (percent) \1\ Population --------------------------------------------- (in Medicaid millions) Employment or Other \3\ Uninsured based \2\ Medicare ---------------------------------------------------------------------------------------------------------------- Race/ethnicity: White............................................. 166.0 74.5 7.6 11.2 13.7 Black............................................. 31.5 52.5 24.1 8.2 23.8 Hispanic.......................................... 30.0 44.2 17.8 5.0 37.0 Other............................................. 11.9 62.1 12.3 11.1 22.0 Family type: Female-headed with children....................... 29.7 42.8 36.2 6.6 22.5 Male- or two-parent-headed with children.......... 116.1 74.0 8.0 9.9 14.9 No children....................................... 93.5 66.4 7.4 11.3 21.4 Region: Northeast......................................... 45.3 69.2 12.5 8.3 15.8 Midwest........................................... 55.8 73.8 10.0 8.8 13.7 South............................................. 82.9 64.8 11.1 11.2 20.6 West.............................................. 55.4 62.4 11.8 11.1 21.7 Poverty level: \4\ <1.0 of poverty................................... 31.8 20.7 42.7 7.5 35.8 1.0-1.49 of poverty............................... 19.5 38.4 24.6 9.9 34.9 1.5-1.99 of poverty............................... 20.7 55.3 13.6 11.2 27.5 2.0+ of poverty................................... 167.3 80.8 3.4 10.4 12.0 Citizenship: Native............................................ 215.9 69.1 11.5 10.2 16.2 Naturalized....................................... 7.9 63.0 7.8 11.3 23.5 Noncitizens....................................... 15.6 42.3 9.4 6.8 45.1 --------------------------------------------------------- Total........................................... 239.3 67.2 11.3 10.0 18.4 ---------------------------------------------------------------------------------------------------------------- \1\ People may have more than one source of health insurance; percentages may total to more than 100. \2\ Group health insurance through employer or union. \3\ Private nongroup health insurance, veterans coverage, military health care or other government coverage. \4\ In 1998, the weighted average poverty threshold for a family of four was $16,660. Source: Congressional Research Service analysis of data from the March 1999 Current Population Survey. comprised 13 percent of the under 65 population, but were 25 percent of the uninsured population; comparable numbers for blacks were 13 percent and 17 percent, respectively. The rate of employment-based health coverage was highest among whites (75 percent) and the rate of Medicaid/Medicare coverage was highest for blacks (24 percent). \2\ --------------------------------------------------------------------------- \2\ Medicaid covered 10 percent of the nonelderly population and Medicare covered less than 2 percent. About 22 percent of blacks had Medicaid coverage. --------------------------------------------------------------------------- People in male-headed or two-parent families with children were most likely to be insured (85 percent), followed by those in families with no children (79 percent) and those in female- headed families with children (78 percent). While the rates of coverage were similar for male-present (one- or two-parent) and female-headed (single-parent) families with children, the sources of coverage were quite different: coverage was employment based for 74 percent of male-present families compared to 43 percent of female-headed families, while coverage came from Medicaid/Medicare for 8 percent of male- present families compared to 36 percent of female-headed families. People living in the Midwest were more likely to have insurance (86 percent) than people in the Northeast (84 percent), West (78 percent), and South (79 percent). About 70 percent of those living in the Northeast and Midwest had employment-based health insurance compared to about 63 percent in the South and West. Among individuals with incomes at least two times the poverty level, 88 percent had health insurance compared to 64 percent of the poor (i.e., those with incomes less than the poverty level). The poor accounted for 13 percent of the under 65 population, but were 26 percent of the uninsured. Only 21 percent of the poor received health coverage through employment, while 43 percent had either Medicaid or Medicare coverage. Over 80 percent of people with incomes at least two times the poverty level were covered through an employer, and 3 percent had Medicaid or Medicare coverage. Among people born with U.S. citizenship (i.e., natives), 84 percent had health insurance compared to 55 percent of noncitizens. Noncitizens accounted for 7 percent of the population under 65, but were 16 percent of the uninsured. About 42 percent of noncitizens were covered through employment, compared to about two-thirds of citizens. Employment characteristics Table C-26 shows the rate of health insurance coverage by employment characteristics for people under age 65 who were workers or their dependents. In 1998, the rate of employment- based health insurance coverage generally increased as firm size increased. Among workers and dependents of workers in large firms (1,000 or more employees), 90 percent were insured compared to 70 percent in small firms (under 10 employees). People in small firms accounted for 16 percent of the under 65 population but 27 percent of the uninsured. Insurance coverage varied according to industry as well. Agriculture and personal services had the highest proportion of uninsured workers and dependents--over 30 percent. Employment-based coverage was most likely for workers and dependents in public administration, finance/insurance, mining, and manufacturing of durable goods. Among workers, 85 percent of those employed full time, full year had health insurance and it was most often obtained through their own employment (68 percent); their dependents had comparable levels of coverage. Workers with part- TABLE C-26.--HEALTH INSURANCE COVERAGE BY EMPLOYMENT CHARACTERISTICS \1\ FOR PEOPLE UNDER AGE 65, 1998 ---------------------------------------------------------------------------------------------------------------- Type of insurance (percent) \2\ Population --------------------------------------------- (in From millions) From own other's Other \4\ Uninsured job \3\ job \3\ ---------------------------------------------------------------------------------------------------------------- Firm size: \5\ Under 10............................................ 39.3 17.2 31.6 26.4 30.2 10-24............................................... 18.2 27.8 33.6 19.2 24.9 25-99............................................... 27.5 34.7 36.7 14.8 18.9 100-499............................................. 30.6 40.7 36.2 14.3 14.5 500-999............................................. 12.2 44.3 38.2 13.0 11.2 1,000+.............................................. 85.9 42.9 39.9 14.1 10.0 Industry: \5\ Agriculture......................................... 5.6 15.2 26.5 30.0 33.1 Mining.............................................. 1.3 38.3 45.5 8.6 12.9 Construction........................................ 16.5 24.2 34.6 16.5 29.1 Durable goods....................................... 23.9 41.2 44.3 10.7 9.8 Nondurable goods.................................... 14.2 39.3 40.0 11.0 14.6 Transportation...................................... 17.0 39.8 41.6 11.5 13.0 Wholesale trade..................................... 9.1 36.1 42.7 12.5 14.1 Retail trade........................................ 31.0 27.1 29.9 21.2 26.8 Finance/insurance................................... 13.5 42.1 40.6 12.3 10.2 Business services................................... 14.7 28.8 33.2 21.1 22.3 Personal services................................... 5.8 21.9 25.3 27.5 30.9 Entertainment....................................... 3.3 34.0 30.8 20.6 21.3 Professional services............................... 45.5 42.3 36.8 16.3 11.3 Public administration............................... 12.2 43.1 39.0 26.7 5.3 Labor force attachment of workers: Full time, full year................................ 94.2 67.8 12.0 10.3 14.9 Part time, full year................................ 7.3 38.4 16.2 23.4 27.8 Full time, part year................................ 15.6 50.0 8.5 19.2 28.8 Part time, part year................................ 6.4 25.1 16.2 31.6 34.0 Labor force attachment of workers' dependents: \1\ Full time, full year................................ 76.2 0.0 76.3 17.3 13.3 Part time, full year................................ 3.2 0.0 41.9 40.4 24.7 Full time, part year................................ 8.6 0.0 43.6 42.9 22.1 Part time, part year................................ 2.2 0.0 24.0 63.6 21.3 Not in labor force.................................... 25.7 \6\ 13.1 \6\ 10.8 51.2 30.9 --------------------------------------------------------- Total........................................... 239.3 33.2 34.0 20.5 18.4 ---------------------------------------------------------------------------------------------------------------- \1\ For dependents, employment characteristics are for the person providing dependent coverage under employment- based or private insurance. If other coverage, characteristics are from the head of household or spouse if head is not employed. \2\ People may have more than one source of health insurance. \3\ Group health insurance through employer or union. \4\ Medicare, Medicaid, private nongroup health insurance, veterans coverage, and other government coverage. \5\ For persons who worked and their dependents. \6\ Person was retired, disabled, or answered questions inconsistently. Source: Congressional Research Service analysis of data from the March 1999 Current Population Survey. time, part-year employment had an insured rate of 66 percent. Workers who worked less than full time, full year and their dependents represented 18 percent of the population, but 27 percent of the uninsured, while nonworkers were 11 percent of the population and 18 percent of the uninsured. Characteristics of the Uninsured Population Under Age 65 As reported above, people who lack health insurance differ from the population as a whole: they are more likely to be poor, young adults, Hispanic, and work for small firms. Chart C-2 illustrates selected characteristics of the uninsured population under age 65 in 1998--age, race, poverty level, citizenship, firm size, and labor force ties. Over one-fourth (27 percent) of the uninsured were under age 19, and 52 percent were white. A large proportion (46 percent) had incomes two or more times the poverty level, while 26 percent were poor. Almost 80 percent were native citizens and 27 percent worked or were dependents of workers in small firms (one to nine employees). Over half (55 percent) were full-time, full-year workers or their dependents, 27 percent had less than full time attachment to the labor force, and 18 percent had no labor force ties. CHART C-2. CHARACTERISTICS OF THE UNINSURED POPULATION UNDER AGE 65, 1998 Note._Totals may not equal sum of rounded components. Source: Congressional Research Service analysis of data from the March 1999 Current Population Survey. Trends in Health Insurance Coverage Trends in coverage by type of insurance for the noninstitutionalized U.S. population under age 65 are shown in table C-27. Data for 1980 are not available because the CPS omitted some health insurance questions for that year. Changes in the CPS questionnaire, on which these rates are based, preclude direct comparisons between three time periods: 1979- 86, 1987-93, and 1994-98.\3\ --------------------------------------------------------------------------- \3\ Beginning with the 1987 data, the survey asked about employment-based coverage for all persons over 14, when before only workers were asked about such coverage. Moreover, the newer surveys included additional questions regarding coverage of children. As a result, the number of people with employment-based coverage increased, especially among retirees, and the number of children with coverage also increased. Beginning with the 1994 data, the survey asked additional questions about private health insurance, and changed the order of questions such that questions about private coverage preceded questions about other forms of health insurance. As a result, the number of people estimated to have private coverage increased, and the distribution of coverage between group and nongroup shifted toward more group coverage. Care must be exercised when considering these numbers. Also note that individuals may have had more than one source of coverage. --------------------------------------------------------------------------- Between 1979 and 1986, the percent covered by all forms of health insurance decreased, with a decrease of 3 percentage points between 1979 and 1984 and a slight increase between 1984 and 1986, but not to levels shown previously. Between 1979 and 1986, the percent of the population insured by government programs remained roughly stable, and the percents with employment-based and other coverage steadily declined. Between 1987 and 1993, the percent covered also declined by about 3 percentage points, from about 86 percent to 83 percent. During this period, the percent with employment-based coverage continued to decline steadily, the percent with Medicare or Medicaid increased, the percent with other types of coverage declined and then rose to about where it was in 1987, and the percent uninsured continued to steadily increase. Since 1993 the percent covered has declined from 83 percent to 82 percent. The large changes between 1993 and 1994 in employment-based and other coverage, which includes private nongroup coverage, appear to be a function of changes in the CPS questionnaire. Differences in coverage between 1986 and 1987, and between 1993 and 1994, are a function both of changes in the CPS questionnaire and actual changes in coverage. Assuming that all differences between 1986 and 1987, and between 1993 and 1994, are due to questionnaire changes and no changes in coverage patterns occurred during these transition periods, we can estimate trends from 1979 to 1998. Over this period, the percent with employment-based coverage decreased by about 7 percentage points. From 1979 through 1986, the percent with employment-based coverage declined by 2.6 percent points, from 68.6 to 66.0 percent. From 1987 through 1993, the decline was 6.2 percentage points. If we assume no change in insurance coverages from 1986 to 1987, and from 1993 to 1994, the total decline from 1979 to 1994 was 8.8 percentage points (i.e., 2.6 percentage points plus 6.2 percentage points). The percent with employment-based coverage increased by 1.9 percentage points between 1994 and 1998, from 65.3 to 67.2 percent for a total decrease of about 7 percentage points (i.e., -8.8 + 1.9) from 1979 to 1998. Note that the decreases in coverage do not equal the increases in uninsured because some individuals had more than one type of coverage. Similarly, over the 1979-98 period, TABLE C-27.--HEALTH INSURANCE COVERAGE FOR THE NONINSTITUTIONALIZED U.S. POPULATION UNDER 65, SELECTED YEARS 1979-98 \1\ [Numbers in thousands] -------------------------------------------------------------------------------------------------------------------------------------------------------- Employment based Government \3\ Other \4\ Uninsured Total \2\ ----------------------------------------------------------------------------------- Year --------------------- Number Percent Number Percent Number Percent Number Percent Number Percent -------------------------------------------------------------------------------------------------------------------------------------------------------- 1979........................................... 133,074 68.6 17,031 8.8 32,631 16.8 28,451 14.7 197,104 100.0 1981........................................... 137,158 67.9 18,520 9.2 32,392 16.0 30,487 15.1 201,926 100.0 1983........................................... 134,908 65.7 18,501 9.0 30,505 14.9 34,796 17.0 205,322 100.0 1985........................................... 137,461 65.7 18,711 8.9 29,924 14.3 36,741 17.6 209,272 100.0 1987 \1\....................................... 143,497 67.5 19,919 9.4 25,957 12.2 30,673 14.4 212,495 100.0 1989........................................... 144,716 66.9 20,762 9.6 25,603 11.8 33,039 15.3 216,426 100.0 1990........................................... 142,520 65.2 23,821 10.9 25,723 11.8 34,352 15.7 218,551 100.0 1991........................................... 142,359 64.5 26,170 11.9 25,034 11.4 35,069 15.9 220,589 100.0 1992 \5\....................................... 141,262 62.5 28,924 12.8 26,017 11.5 38,222 16.9 226,119 100.0 1993 \1\....................................... 140,439 61.3 31,398 13.7 27,706 12.1 39,349 17.2 228,973 100.0 1994 \1\....................................... 150,663 65.3 31,177 13.5 20,665 8.9 39,428 17.1 230,838 100.0 1995........................................... 152,075 65.4 31,606 13.6 19,051 8.2 40,281 17.3 232,656 100.0 1996........................................... 153,924 65.5 31,143 13.3 18,636 7.9 41,379 17.6 234,915 100.0 1997........................................... 157,079 66.3 27,822 11.7 24,516 10.3 43,115 18.2 237,011 100.0 1998........................................... 160,773 67.2 26,945 11.3 24,035 10.0 43,923 18.4 239,348 100.0 -------------------------------------------------------------------------------------------------------------------------------------------------------- \1\ Questionnaire changes effective in 1987 and 1994 make numbers not strictly comparable over time. Beginning with 1987 data, the survey asked all persons over 14, not just workers, about employment-based health coverage, and included additional questions regarding coverage of children. Beginning with 1994 data, the survey included additional questions about private coverage and the order of questions was altered, such that questions about private coverage preceded questions about other forms of health insurance. \2\ Group health insurance through employer or union. \3\ Medicare or Medicaid. \4\ Private nongroup health insurance, veterans coverage, or military health care. \5\ Based on revised weights from the 1990 Census. Note.--Persons may have more than one type of coverage; percents may total to more than 100. Data for 1980 not available because some health-related questions were omitted from the Current Population Survey that year. Source: Congressional Research Service analysis of data from the March Current Population Surveys, various years. the percent with Medicaid or Medicare increased by about 3 percentage points, the percent with other types of coverage declined by about 2 percentage points, and the percent uninsured increased by approximately 7 percentage points. UNCOMPENSATED CARE COSTS IN PROSPECTIVE PAYMENT SYSTEM (PPS) HOSPITALS, 1980-98 Uncompensated care is a term used to describe services provided to patients who are unable or unwilling to pay. It includes charity care and bad debts. Charity care is care for which no payment is expected. Bad debts are charges not paid by uninsured individuals, including copayments not paid by insured individuals. For this analysis, hospital charges have been adjusted to reflect the cost of care that was provided but not paid for. Public hospitals and some private institutions receive government operating subsidies that at least partially offset their uncompensated care costs. These subsidies are not always directed specifically toward charity care, but they nonetheless serve to lessen the burden of a high charity care load. This analysis examines uncompensated care both before and net of government subsidies. The financial burden of uncompensated care increased substantially in the first half of the 1980s, as shown in table C-28. Between 1980 and 1986, uncompensated care costs before government subsidies grew at an annual rate of 14.7 percent, rising from $3.9 billion to $8.9 billion. Between 1986 and 1992, uncompensated care costs had grown at an annual rate of 8.9 percent, to $14.9 billion. Since 1992, the growth trend has declined; uncompensated care rose at 5.4 percent per year until 1995 and then at 2.9 percent from 1995 to 1998. By 1998, uncompensated care costs (before government subsidies) in community hospitals equaled $19 billion. Over this same time period, government operating subsidies for uncompensated care grew at a much slower rate. Since 1995, the amount of operating subsidies has declined absolutely, from 3.1 billion to 2.5 billion in 1998. In 1980, the proportion of uncompensated care costs offset by State and local government operating subsidies was 27.8 percent. By 1986, that proportion had fallen to 22.3 percent, and by 1993 subsidies to community hospitals equaled only 19.5 percent. Subsidies fell sharply since then, covering 18.0 percent of uncompensated care costs in 1995 and only 13.2 percent of those costs in 1998. In that year, uncompensated care losses--that is, costs net of government subsidies-- totaled $16.5 billion. These trends are reflected in chart C-3, which compares uncompensated care costs to total hospital expenses in each year. In 1980, 5.5 percent of the resources expended by community hospitals were for patients who could not or would not pay for their care. After accounting for government subsidies, the uncompensated care burden was 3.9 percent. By 1986, uncompensated care costs hit their peak of 6.4 percent of total expenses, and uncompensated care losses rose to 4.9 percent. Throughout the 1990s, uncompensated care costs were just over 6 percent of total expenses, while uncompensated care losses increased to just over 5 percent of total expenses. TABLE C-28.--COMMUNITY HOSPITAL UNCOMPENSATED CARE COSTS AND GOVERNMENT OPERATING SUBSIDIES, SELECTED YEARS 1980-98 -------------------------------------------------------------------------------------------------------------------------------------------------------- Amount (billions) Average annual percent change --------------------------------------------------------------------------------------------------- 1980 1986 1992 1993 1995 1996 1997 1998 1980-86 1986-92 1992-95 1995-98 -------------------------------------------------------------------------------------------------------------------------------------------------------- Uncompensated care costs before government subsidies $3.9 $8.9 $14.9 $15.9 $17.5 $18.0 $18.5 $19.0 14.7 8.9 5.4 2.9 Government operating subsidies \1\.................. 1.1 2.0 2.8 3.1 3.1 3.1 2.6 2.5 10.5 6.0 3.7 -7.2 Uncompensated care costs net of government subsidies 2.8 6.9 12.1 12.8 14.3 14.9 15.8 16.5 16.1 9.7 5.8 4.9 Proportion of uncompensated care costs covered by 27.8 22.3 18.9 19.5 18.0 17.3 14.2 13.2 government subsidies (in percent).................. -------------------------------------------------------------------------------------------------------------------------------------------------------- \1\ Government operating subsidies include all subsidies from State and local government, up to total uncompensated care costs at each hospital. Note.--Totals may not equal sum of rounded components. Source: Medicare Payment Advisory Commission analysis of data from the American Hospital Association Annual Survey of Hospitals. CHART C-3. UNCOMPENSATED CARE AS A PERCENTAGE OF TOTAL COMMUNITY HOSPITAL EXPENSES, 1980-98 Note._Government operating subsidies include all subsidies from State and local government, up to total uncompensated care costs for each hospital. Source: Medicare Payment Advisory Commission analysis of data from the American Hospital Association Annual Survey of Hospitals. The burden of uncompensated care is borne by hospitals in every group, but some types of hospitals devote a higher percentage of their resources than others to this care (table C-29). Hospitals in urban areas had uncompensated care costs equal to 6.3 percent of their total expenses in 1998, compared with 5.2 percent for rural hospitals. However, urban hospitals also receive the bulk of subsidies from State and local governments. Urban hospitals' uncompensated care losses are 5.4 percent which is still higher than those in rural hospitals at 4.8 percent, but the differential has narrowed. Among major teaching hospitals (those with at least 0.25 residents per bed), there is a sharp difference between those that are public and those that are privately owned: Public major teaching hospitals in 1998 devoted 18.8 percent of their resources to patients who could not or would not pay, and sustained losses on these patients equal to 12 percent of their total costs. This compares to private major teaching hospitals which devoted 5.1 percent of their resources to uncompensated care and sustained losses equal to 5 percent of their total costs. Public teaching hospitals with fewer residents per bed devoted 10.7 percent of their resources to patients who could not or would not pay and sustained losses equal to 8 percent of their total costs. Uncompensated care costs and losses are highly concentrated among a relatively small group of hospitals, particularly in urban areas: Urban government hospitals devoted 14.6 percent of their resources to uncompensated care and sustained losses on nonpaying patients equal to 9.8 percent of their total costs. Urban proprietary hospitals provide the least care to nonpaying patients, only 4 percent of their total costs. TABLE C-29.--COMMUNITY HOSPITAL UNCOMPENSATED CARE COSTS AS A PROPORTION OF TOTAL COSTS, BY HOSPITAL GROUP, 1998 [In percent] ------------------------------------------------------------------------ Uncompensated Uncompensated care costs, care costs, net Hospital group before government of government subsidies subsidies ------------------------------------------------------------------------ Urban............................. 6.3 5.4 Rural............................. 5.2 4.8 Major teaching, public............ 18.8 12.0 Major teaching, private........... 5.1 5.0 Other teaching, public............ 10.7 8.0 Other teaching, private........... 4.2 4.2 Nonteaching, public............... 6.3 5.1 Nonteaching, private.............. 4.6 4.5 Urban voluntary................... 4.6 4.5 Urban proprietary................. 4.1 4.0 Urban government.................. 14.6 9.8 Rural voluntary................... 4.9 4.8 Rural proprietary................. 5.2 5.2 Rural government.................. 5.8 4.7 ------------------------------------- All hospitals................. 6.0 5.2 ------------------------------------------------------------------------ Note.--Government operating subsidies include all subsidies from State and local government, up to total uncompensated care costs at each hospital. Source: Prospective Payment Assessment Commission analysis of data from the American Hospital Association Annual Survey of Hospitals. INTERNATIONAL HEALTH SPENDING This section analyzes trends in health expenditures for the 29 Organization for Economic Cooperation and Development (OECD) countries from 1970 to 1997. Table C-30 illustrates total health expenditures as a percentage of gross domestic product (GDP). In 1970, the mean percent of GDP spent on health care by 25 reporting OECD countries was 5.0 percent with the United States being 46 percent higher than the average with 7.3 percent. By 1995, the overall mean percent of GDP devoted to health expenditures had increased to 7.9 percent while U.S. health spending as a share of GDP had increased to 14.1 percent. Over the next 2 years, the OECD average remained at 7.8 percent while the U.S. figure was 14.1 percent in 1996 and 13.9 percent in 1997. The second to the last column in table C-30 presents per capita health expenditures denominated in U.S. dollars. In 1997, the United States spent $4,095 per capita on health compared to an OECD average of $1,615, calculated on a purchasing power parity basis. The last column illustrates public health expenditures as a percent of total health spending. This public percentage ranged from 45.5 in Korea and 46.4 in the United States to 91.8 in Luxembourg. The OECD average was 74.1 percent. TABLE C-30.--TOTAL HEALTH EXPENDITURES AS A PERCENTAGE OF GROSS DOMESTIC PRODUCT, PER CAPITA HEALTH SPENDING, AND PERCENTAGE OF MEDICAL EXPENDITURES COVERED BY PUBLIC OECD COUNTRIES FOR SELECTED CALENDAR YEARS 1970-97 -------------------------------------------------------------------------------------------------------------------------------------------------------- Per Country 1960 1965 1970 1975 1980 1985 1990 1995 1996 1997 capita Percent 1997 public -------------------------------------------------------------------------------------------------------------------------------------------------------- Australia............................................ 4.9 5.1 5.7 7.5 7.3 7.7 8.2 8.4 8.6 8.4 $1,909 66.7 Austria.............................................. 4.3 4.6 5.3 7.2 7.7 6.7 7.2 8.0 8.0 8.3 1,905 73.0 Belgium.............................................. 3.4 3.9 4.1 5.9 6.5 7.3 7.5 7.9 7.8 7.6 1,768 87.6 Canada............................................... 5.4 5.9 7.0 7.2 7.2 8.3 9.2 9.4 9.3 9.2 2,175 69.8 Czech Republic....................................... ...... ...... ...... ...... 3.8 4.5 5.4 7.5 7.2 7.2 943 91.7 Denmark.............................................. 3.6 ...... 5.9 6.3 9.3 8.7 8.3 8.1 8.1 8.0 2,042 83.8 Finland.............................................. 3.9 4.9 5.7 6.4 6.5 7.3 8.0 7.7 7.8 7.4 1,525 76.0 France............................................... 4.2 5.2 5.8 7.0 7.6 8.5 8.9 9.8 9.8 9.6 2,047 74.2 Germany.............................................. 4.8 5.1 6.3 8.8 8.8 9.3 8.7 10.4 10.8 10.7 2,364 77.1 Greece............................................... 3.1 ...... 5.7 ...... 6.6 ...... 7.6 8.4 8.4 8.6 1,196 57.7 Hungary.............................................. ...... ...... ...... ...... ...... ...... 6.1 7.0 6.6 6.5 642 69.1 Iceland.............................................. 3.3 3.9 5.0 5.3 6.2 7.3 7.9 8.2 8.2 7.9 1,981 83.8 Ireland.............................................. 3.8 4.2 5.3 7.7 8.7 7.9 6.7 7.0 6.4 6.3 1,293 76.7 Italy................................................ 3.6 4.3 5.2 6.2 7.0 7.1 8.1 7.7 7.8 7.6 1,613 69.9 Japan................................................ 3.0 4.5 4.6 5.6 6.5 6.7 6.1 7.2 7.1 7.2 1,760 79.9 Korea................................................ ...... ...... 2.3 2.3 3.7 4.3 5.2 5.4 5.9 6.0 870 45.5 Luxembourg........................................... ...... ...... 3.7 5.1 6.2 6.1 6.6 6.7 6.8 7.0 2,303 91.8 Mexico............................................... ...... ...... ...... ...... ...... ...... 3.6 4.9 4.6 4.7 363 60.0 Netherlands.......................................... 3.8 4.3 5.9 7.5 7.9 7.9 8.3 8.8 8.7 8.5 1,933 72.6 New Zealand.......................................... 4.3 ...... 5.2 6.7 6.0 5.3 7.0 7.3 7.3 7.6 1,357 77.3 Norway............................................... 2.9 3.5 4.5 6.0 7.0 6.7 7.8 8.0 7.8 7.5 2,017 82.2 Poland............................................... ...... ...... ...... ...... ...... ...... 4.4 4.5 4.9 5.2 386 90.4 Portugal............................................. ...... ...... 2.8 5.6 5.8 6.3 6.4 7.8 7.9 7.9 1,148 60.0 Spain................................................ 1.5 2.6 3.7 4.9 5.6 5.7 6.9 7.3 7.4 7.4 1,183 76.1 Sweden............................................... 4.7 5.5 7.1 7.9 9.4 9.0 8.8 8.5 8.6 8.6 1,762 83.3 Switzerland.......................................... 3.1 3.6 4.9 6.6 6.9 7.7 8.3 9.6 10.1 10.0 2,611 69.9 Turkey............................................... ...... ...... 2.4 2.7 3.3 2.2 3.6 3.3 3.8 4.0 259 72.8 United Kingdom....................................... 3.9 4.1 4.5 5.5 5.6 5.9 6.0 6.9 6.9 6.8 1,391 84.6 United States........................................ 5.2 5.9 7.3 8.2 9.1 10.6 12.6 14.1 14.1 13.9 4,095 46.4 -------------------------------------------------------------------------------------------------- OECD average..................................... ...... ...... 5.0 ...... 6.8 ...... 7.2 7.9 7.8 7.8 1,615 74.1 -------------------------------------------------------------------------------------------------------------------------------------------------------- Source: OECD Health Data 1999. 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