CHILD POLICY This PDF document was made available from www.rand.org as a public CIVIL JUSTICE service of the RAND Corporation. EDUCATION ENERGY AND ENVIRONMENT Jump down to document HEALTH AND HEALTH CARE 6 INTERNATIONAL AFFAIRS NATIONAL SECURITY The RAND Corporation is a nonprofit research POPULATION AND AGING PUBLIC SAFETY organization providing objective analysis and effective SCIENCE AND TECHNOLOGY solutions that address the challenges facing the public SUBSTANCE ABUSE and private sectors around the world. TERRORISM AND HOMELAND SECURITY TRANSPORTATION AND INFRASTRUCTURE Support RAND Purchase this document Browse Books & Publications Make a charitable contribution For More Information Visit RAND at www.rand.org Explore RAND Health View document details Limited Electronic Distribution Rights This document and trademark(s) contained herein are protected by law as indicated in a notice appearing later in this work. This electronic representation of RAND intellectual property is provided for non-commercial use only. Permission is required from RAND to reproduce, or reuse in another form, any of our research documents for commercial use. This product is part of the RAND Corporation technical report series. Reports may include research findings on a specific topic that is limited in scope; present discus- sions of the methodology employed in research; provide literature reviews, survey instruments, modeling exercises, guidelines for practitioners and research profes- sionals, and supporting documentation; or deliver preliminary findings. All RAND reports undergo rigorous peer review to ensure that they meet high standards for re- search quality and objectivity. Health Status and Medical Treatment of the Future Elderly Final Report Dana P. Goldman, Paul G. Shekelle, Jayanta Bhattacharya, Michael Hurd, Geoffrey F. Joyce, Darius N. Lakdawalla, Dawn H. Matsui, Sydne J. Newberry, Constantijn W. A. Panis, Baoping Shang TR-169-CMS August 2004 Prepared for the Centers for Medicare and Medicaid Services The research described in the report was conducted by RAND Health for the Centers for Medicare and Medicaid Services. Library of Congress Cataloging-in-Publication Data Health status and medical treatment of the future elderly : final report / Dana P. Goldman ... [et al.]. p. cm. “TR-169.” Includes bibliographical references. ISBN 0-8330-3653-X (pbk.) 1. Older people—Health and hygiene—United States—Forecasting. 2. Older people—Medical care— Economic aspects—United States. 3. Medical care, Cost of—United States—Forecasting. 4. Medical care—United States—Mathematical models. [DNLM: 1. Health Expenditures—trends—United States. 2. Health Services for the Aged—economics— United States. 3. Health Planning—United States. 4. Health Status—Aged—United States. 5. Medicare— economics. 6. Population Dynamics—United States. WT 31 H4344 2004] I. Goldman, Dana P. (Dana Paul), 1966– II. Rand Corporation. RA564.8.H453 2004 613'.0438'097301—dc22 2004012328 The RAND Corporation is a nonprofit research organization providing objective analysis and effective solutions that address the challenges facing the public and private sectors around the world. RAND’s publications do not necessarily reflect the opinions of its research clients and sponsors. R® is a registered trademark. A profile of RAND Health, abstracts of its publications, and ordering information can be found on the RAND Health home page at www.rand.org/health. © Copyright 2004 RAND Corporation All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from RAND. Published 2004 by the RAND Corporation 1700 Main Street, P.O. Box 2138, Santa Monica, CA 90407-2138 1200 South Hayes Street, Arlington, VA 22202-5050 201 North Craig Street, Suite 202, Pittsburgh, PA 15213-1516 RAND URL: http://www.rand.org/ To order RAND documents or to obtain additional information, contact Distribution Services: Telephone: (310) 451-7002; Fax: (310) 451-6915; Email: [email protected] PREFACE To help the government take the actions necessary to keep the Medicare trust funds solvent, the Centers for Medicare and Medicaid Services (CMS) must generate accurate projections of current and future health care spending. Also critical is to understand the key biomedical breakthroughs and demographic trends that are likely to occur and that might affect health and spending outcomes. At the request of CMS, RAND researchers developed a demographic- economic model framework of health care spending projections, called the Future Elderly Model, that allows microsimulations to be used to ask and answer what-if questions about the effects of changes in health status on future health care costs. This report documents the results of the project in terms of projected biomedical breakthroughs, disease and disability outcomes, and expenditures among the elderly from the year 2000 through 2030. Study findings should be of interest to the CMS Office of the Actuary, health policy planners, and health economists. Those interested in biomedical advances and their likely effect on the elderly may also have an interest in the findings. This research was sponsored by the Centers for Medicare and Medicaid Services and was carried out by RAND Health. iii THE RAND CORPORATION QUALITY ASSURANCE PROCESS Peer review is an integral part of all RAND research projects. Prior to publication, this document, as with all documents in the RAND technical report series, was subject to a quality assurance process to ensure that the research meets several standards, including the following: The problem is well formulated; the research approach is well designed and well executed; the data and assumptions are sound; the findings are useful and advance knowledge; the implications and recommendations follow logically from the findings and are explained thoroughly; the documentation is accurate, understandable, cogent, and temperate in tone; the research demonstrates understanding of related previous studies; and the research is relevant, objective, independent, and balanced. Peer review is conducted by research professionals who were not members of the project team. RAND routinely reviews and refines its quality assurance process and also conducts periodic external and internal reviews of the quality of its body of work. For additional details regarding the RAND quality assurance process, visit www.rand.org/standards/. iv CONTENTS THE RAND CORPORATION QUALITY ASSURANCE PROCESS ................................. IV SUMMARY .............................................................................................................................. XVI BACKGROUND .................................................................................................................................................XVI STUDY DESIGN AND METHODS................................................................................................................. XVII Literature Review.............................................................................................................................xvii Expert Panel Assessments................................................................................................................xvii Development of the Future Elderly Model......................................................................................xviii The What-If Scenarios ....................................................................................................................... xx Evaluating the Usefulness of the FEM to the Office of the Actuary.................................................. xx RESULTS............................................................................................................................................................. XX The Potential Breakthroughs.............................................................................................................. xx The Future Elderly Model................................................................................................................ xxv Determinants of Health Care Expenditures (the Cost Model).......................................................... xxv Determinants of Health Status: The Health Status Transition Model ............................................. xxvi The Health Status of Future Medicare Users .................................................................................xxvii Consideration of Future Scenarios .................................................................................................xxvii Evaluating the Usefulness of the FEM............................................................................................ xxix CONCLUSIONS ..............................................................................................................................................XXXI Modeling Future Health and Spending ........................................................................................... xxxi Implications of the Panel Findings.................................................................................................xxxii Implications of the Results of Our “What-If” Scenarios...............................................................xxxiii Recommendations ......................................................................................................................... xxxiv CHAPTER 1: INTRODUCTION.................................................................................................1