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Introduction and Summary of Recommendations In the coming decade, the nation's decision makers will continue to be challenged by changing demands for social and health services due to the anticipated rapid rate of growth of the elderly (65 years or older) and especially the oldest-old (85 years or older) populations. In the 12 years until the year 2000, it is anticipated that the very old (80 years or older) U.S. population will be the largest single federal entitlement group, consuming $82.8 billion (1984 dolIars) in benefits (Torrey, 1985~. The growth of these populations will be even more rapid soon after the turn of the century, as the post World War II baby-boom cohorts become elderly. To respond wisely to the multifaceted demands of an aging U.S. society, it is crucial to have the data and information necessary to make difficult choices about resource allocation and program struc- ture. To produce this information: (1) appropriate data must be collected and (2) appropriate models and statistical methods must be applied to the analysis of those data. Although there is currently a sizable expenditure on data collection activities, the investment is minuscule compared with the size of the federal and state programs that this information is used to manage and direct. Furthermore, recent scientific evidence on the modifiable nature of health and functional transitions among the old and oldest-old populations sug- gests that many aspects of current data collection are inadequate to support policy analysis. Efforts dedicated to methodological de- velopment of unproved analytic and forecasting tools are even more deficient. Data production and analysis, as well as methodological 1

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2 AGING POPULATION IN THE TWENTY-FIRST CENTURY research, will need careful and thorough review, and modification in the light of that review, to maximize the utility of the data collected. BACKGROUND Concern about the inadequacies of statistical information and methodology available for policy decisions for the elderly is wide- spread. Seven federal agencies that shared this concern the Vet- erans Administration and six agencies of the U.S. Department of Health and Human Services: the Health Care Financing Admin- istration, the National Center for Health Statistics, the National Institute of Mental Health, the National Institute on Aging, the Of- fice of the Assistant Secretary for Planning and Evaluation, and the Social Security Administration joined forces and sponsored a study by the National Research Council to address these problems. The panel was charged with the following major activities: 1. To determine the data requirements for policy development for health care of the elderly during the next decade; to assess the statistical adequacy of current data sources pertaining to the health care of the elderly; and to identify major shortcomings and recom- mend appropriate remedies and actions; 2. To identify the essential components of a comprehensive pro- gram of statistics on the elderly that can be implemented within a decentralized statistical system (assuming continuation of the cur- rent decentralized system) and that would provide adequate data on aging for all functional areas and to recommend changes and procedures that would facilitate integrating data from the various components; and 3. To determine whether changes or refinements are needed in the statistical methodology used in health policy analysis or in the planning and administration of programs for the elderly and to rec- ornmend actions or further research. The panel approached these charges in a period when budgetary con- straints assumed special significance because of their implications for statistical activities of federal agencies. The panel therefore placed emphasis on modifications to existing national statistical programs and surveys and those that are getting under way an approach that led to numerous recommendations but was designed to recognize cur- rent budget stringencies. Accordingly, the panel's recommendations,

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INTROD ACTION AND SUMMARY OF RECOMMENDATIONS 3 whenever possible, are formulated to capitalize on and enhance avail- able data resources, surveys, and administrative records. Neverthe- less, meeting the needs for data is not cost-free, and new budgetary support for existing agencies will be essential. In making its recommendations, the pane! has dealt with data requirements for the immediate future and has also provided a long- range planning guide for the collection and analysis of statistical ata for policy analysis for the elderly population over the next decade. We recognize that many of the surveys and administrative record systems that are the subject of our recommendations are not limited to the elderly and that their implementation will have to fit into the agencies' comprehensive plans for improving their statistical systems. With careful planning, and some additional resources, it should be possible to implement all the recommendations before the twenty-first century. Several recommendations specify the frequency with which surveys should be conducted. The recommended cycles represent the best judgment of pane! members, but we recognize that agencies will have to examine the proposed cycles more intensively, drawing on input from nongovernmental sources. In the course of its work, the panel paid particular attention to overlap and duplication between the major data systems and con- cluded that data gaps are much more serious than overlap. There are surveys that appear to cover many of the same areas, but they differ substantially on specific components of concern to policy makers, particularly in content and the populations covered. Many of the data gaps are the result of program adjustments made by federal sta- tistical agencies in response to the changing fiscal environment of the last decade and the accompanying reductions in budgetary support. In many cases, these changes were made hastily, without adequate consideration of their short-term and Tong-term consequences, and thus have not supported the development of information for well- informed public policy debate. Because of budget reductions, the statistical agencies have been forced to make changes in programs and policies in recent years- changes that affect the availability of statistics on the elderly. These changes involve one or more of the following: (1) changing the fo- cus from policy-oriented statistical programs to those that support the administrative aspects of government; (2) reducing the periodic- ity (or frequency of data collection) of major surveys; (3) reducing the coverage of surveys, through deletion of specific subpopulations from the universes of interest or through reduction of sample size;

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4 AGING POPULATION IN THE TWENTY-FIRST CENTURY (4) reducing efforts in the areas of data collection operations, data processing, and data dissemination; (5) reducing the timeliness of data dissemination, of both hard-copy reports and public-use data files; and (6) postponing or eliminating the regular review of data needs in developing areas, usually in the interest of protecting core programs within agencies. Specific examples of the types of adjust- ments cited above are considered in Appendix B. which examines the programs of those agencies responsible for the information bases used for supporting policy development in aging. In short, the panel faced a complex task. Our deliberations took place during a cost-conscious era, there are serious gaps in the data needed for policy analysis, and we recognized the need to strike a balance between short- and Tong-term concerns in formulating our recommendations. As a basis for its work the pane! compiled an inventory (Na- tional Research Council, 1986) of 117 data sets related directly or indirectly to health of the elderly- data sets that remained follow- ing a decade of changes the agencies have been forced to make in response to budget stringency. Simply put, a systematic review of these data sets led the panel to the conclusion that the available information is inadequate for policy analysis. A major concern of the panel relates to remedying this situation and ensuring availability of information adequate in scope and timeliness for policy purposes. Careful attention has been paid to the most urgent improvements needed in the existing surveys and in the use that can be made of systems of administrative records. No new large information sys- tem is recommended: the pane! considered it more cost-effective and more acceptable politically to obtain the new data required for policy use by adding to existing surveys. Recommendations in the report address data requirements that can be met by federal information systems that are national in coverage. The pane! notes that data sets generated in epidemiological studies, longitudinal community surveys, and evaluation studies may be equally important for policy purposes, but they fall outside the scope of the charge of the panel. HEALTH POLICY ISSUES The Changing Policy Agenda Changes in socioeconomic, demographic, and health care trends frequently raise new health policy issues. Other issues come to the

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INTRODUCTION AND SUMMARY OF RECOMMENDATIONS 5 attention of policy makers because of the efforts of interest groups and public officials or as a result of particular dramatic events. For example, the release of Medicare patients from hospitals who still require skilled nursing care with no provision for such care gave focus to concerns of the Senate Special Committee on Aging early in 1985 about the prospective payment system currently in use by the Medicare program. Such broad issues as the cost, the quality, or the availability of health care are continuously part of the general or systemic policy agenda of the country. When a particular issue becomes defined as a crisis, however, sufficient political interest may be generated to move alternative solutions to the more active policy agenda, where solutions are debated in the form of new legislation, appropriations, or regulations (Elder and Coble, 1984~. Otherwise the issue will disappear from the policy agenda, although it may well reemerge on the active agenda with changes in the economic or political climate. For example, in the 1970s the level and trend of national ex- penditures for health care moved cost containment and payment for health care to the top of the active policy agenda. In fact, in the late 1970s, the two major policy initiatives of the Department of Health and Human Services were hospital cost containment and national health insurance (Stoiber, 1979~. Reduction of waste and duplication in the hospital sector was intended to generate the funds for a national health insurance program that would fill the unmet needs for health care. Legislation for national health insurance was considered by Congress but, after much debate, no legislation was adopted and further consideration of national health insurance was dropped. Concern about hospital cost containment continued and was addressed by the Social Security Amendments of 1983, which gave rise to the prospective payment system for Medicare based on diagnosis-related groups. The second significant trend in the prior decade was rapid change in the relation of health care delivery to the reimbursement for ser- vices. Several special issues were raised concerning the new forms of delivery and reimbursement for services, which included health maintenance organizations (HMOs), surgical centers, the expanded role of hospitals for delivery of ambulatory care, hospices, walk-in centers, and multihospital systems. For example, in 1972, legislation was passed to provide grants or loans to support the development of HMOs. Also during the 1970s the federal Administration on Ag- ing began to emphasize that health counseling and health screening

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6 AGING POPULATION IN THE TWENTY-FIRST CENTURY should be included in the social services for the elderly provided at the local level under the Older Americans Act. Yet another exam- ple was the federal government's response to the shortage of physi- cians in the 1960s and 1970s. Federal programs for medical students were legislated programs that stimulated increased enrollments in medical schools and the establishment of new medical services and ultimately resulted in the physician surplus of the 1980s. The full impact of the growing number of physicians on the organization of medical care is not yet clear (Tinier, 1986~. Policy is still being driven by financing and organizational ques- tions, but today there is increased emphasis on examining quaTity- of-care issues, e.g., what health care are the elderly receiving, what good is it doing, and how are the government programs and policies affecting people's lives. This change is a response to issues that have been raised about costs, access to new types of services and technolo- gies, and matching services to the needs of the population generally and, in some instances, to the needs of the elderly specifically. implications for the Panel's Approach The first task of the pane! was to make recommendations to improve the data base for health policy for an aging population during the next decade. The pane! recognized the difficulties arid pitfalls of trying to identify specific policy issues and their related data requirements when looking forward a decade. Such an approach would not only be difficult, but it might also be counterproductive, because policy issues change in unpredictable ways. Accordingly, the panel's recommendations are directed to modifications in the federal statistical system that would ensure the availability of basic data that are relevant and important to the following set of generic health policy issues for an aging society: Who will pay for health care for the elderly and how will it be financed? What alternative health delivery systems can be developed to meet the needs for health care for the elderly in the next decade? How can health promotion and disease prevention be ad- vanced among the elderly? How much health care for the elderly will be needed in the next decade? What will the health status of the elderly be in the next decade?

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INTRODUCTION AND SUMMARY OF RECOMMENDATIONS 7 What are the differences in health status among subgroups of the elderly? What policies and programs are needed to ensure that the elderly receive health care of appropriate quality? What provisions need to be made for population subgroups to avoid problems of equity and access in health care for the elderly? Are health programs and benefits for the elderly equitably distributed across the states? What is the impact of geo- graphic variation? . Are there unintended effects of government programs for health care for the elderly? As stated, these health policy issues are sufficiently broad so as to include the specific policy issues of both the past and current decades and can be expected to include those of the next decade. The special policy issues that arise during a decade are shaped by the trends of the time. In forecasting health policy choices for the l990s, a variety of demographic, economic, organizational, and attitudinal trends can be expected to shape health policy issues in the l990s and to change the U.S. health care system (Blendon, 1986~. In addition to the growing number of oldest-old, specific trends can be expected to influence policy issues for health care for the elderly, which are detailed below. The continuing problem of rising health care costs. Despite the continuing efforts to contain them, the nation's health care costs "are projected to increase from $387 billion in 1984 to $660 billion in 1990, reaching almost $2 trillion by 2000" (Blendon, 1986:67~. The aging of the population is not the only factor contributing to the rising cost: improved and costly medical technologies and the volume and complexity of new types of services may serve to increase health care costs (Blendon, 1986~. The growing concern with quality of care and cost-benefit ra- lios, i.e., what government and private purchasers are receiving for their money. Efforts to manage costs and distinguish high-quality care from less effective and less efficient care are stimulating efforts to monitor all sites of care. The monitoring of hospital performance was mandated through provisions of the Social Security Amendments of 1972, requiring that professional standards review organizations (PSROs) be established to ensure that health care services provided

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8 AGING POPULATION IN THE TWENTY-FIRST CENTURY under the Medicare and Medicaid programs Were medically neces- sary, conformed to appropriate professional standards of quality, and were delivered in the most effective and economical manner possible" (National Health Policy Forum, 1985:4~. Further changes were made in the TEFRA (Tax Equity and Fiscal Responsibility Act) legislation of 1982, replacing the PSROs with professional review organizations (PROs), which have stronger regulatory powers. In 1986 Congress extended the PRO scope to include review of HMOs and other pre- paid plans under contract to provide care to Medicare beneficiaries. The changes also provided for targeted reviews of nursing and home health care services, and (at a later implementation date) services in physicians' offices. As the role of peer review organizations ex- pands, new measures to quantify quality for different services and in different settings will be needed (National Health Policy Forum, 1986~. Continuing rapid change in the organizational structure of the health service delivery system. During the past few years, enroll- ment of Medicare beneficiaries in HMOS has increased because of federal incentives to HMOs to provide capitated comprehensive care for Medicare patients. In addition, partly in response to the prospec- tive payment system for Medicare inpatient services in hospitals, many new types of out-of-hospital health care facilities have received increased attention. These facilities include ambulatory care centers, diagnostic or imaging centers, hospices, rehabilitation institutes, sur- gical centers, and urgent care centers. These facilities may be owned by hospitals or hospital chains, for-profit companies, or groups of physicians (Blendon, 1986~. Such changes are still evolving and there is no clear indication of the extent to which they will affect the pattern and sources of care for the elderly. Since it is not possible to predict the effects of these interacting trends and the specific policy issues they may generate, the pane! focused on providing a general-purpose statistical base for each of the generic policy issues, keeping in mind the current issues and the foreseeable issues on the horizon. We relied on our knowledge about aging and our experience with data requirements and data gaps in past policy analyses to make determinations about the relevance and importance of data for these generic policy issues. General-purpose statistics and statistics derived from adminis- trative records for federal programs cannot be expected to supply all the data needed by policy analysts, although the two types of data taken together can answer many questions. For example, the policy

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INTR OD ACTION AND SUMMARY OF RECOMMENDA TIONS 9 question, "Should we be spending more or less on health care for the elderly?" requires information on who is being served and how much is being spent in the aggregate and for which services. Aggre- gate data from administrative records (e.g., Medicare and Medicaid) can provide information on who is being served and how much is being spent under the programs. The National Medical Expenditure Survey, which surveys a sample of the general population as well as people in institutions, will provide information on expenditures not included in government programs and information on health care expenditures by elderly people who are not participants in these programs. The policy question, "Are the Medicare and Medicaid programs meeting the needs of different categories of the elderly (ru- ral elderly, chronically disabled elderly, etc.), as 'need' is defined by different policy analysts?" calls for evaluations and would probably require special studies, although the national statistics on health ser- vice utilization for various subgroups of the population might be the starting point in designing the special study. The policy question, "How much need will there be for health care for the elderly in future years and what will it cost?" may call for a forecast of the quantity of health care that will be needed assuming policy remains unchanged, in which case demographic data, in conjunction with data from the Health Care Financing Administration on Medicare and Medicaid utilization and costs, are essential to answer this question. Policy analysts frequently require forecasts of the quantity and costs of health care under various hypothetical scenarios, which may have never occurred. A current example of this is found in the eight alternative reform proposals under consideration for redesign- ing Medicare, which are discussed in a report for the National Health Policy Forum (Etheredge, 1987~. One aspect of Medicare benefits under consideration is "Should Medicare eligibility continue to start at age 65, or at younger or older ages?" Forecasts of savings by adopt- ing cutoffs at older ages can be prepared from Medicare data, but the quantity of health services that ended if the eligibility age were changed to 62 (as suggested in one proposal) is more tenuous. The basic data source would be the health service utilization data for ages 62-64 in the National Medical Expenditure Survey. However, since utilization of health services might change under expanded Medicare coverage, data from experience under past policy, although relevant, are not conclusive. In fact, many policy issues cannot be adequately addressed by drawing on general-purpose statistics and data from administrative records. In some cases, a special supplemental survey

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10 AGING POPULATIONIN THE TWENTY-FIRST CENTURY may be needed. In others, targeted experiments are required to learn about the impact of policy options in many settings. RECOMMENDATIONS The multiplicity of agencies concerned with statistics on the el- derly and the numerous surveys and administrative record systems involved led the panel to make a large number of recommendations. The organizational structure of the report also contributed to the number of recommendations, since several chapters on different pol- icy areas may have recommendations about a single survey. To guide the reader, we summarize the recommendations in three ways: first, we present a set of 12 specific priority recommendations; second, we present 5 general recommendations that summarize the chapter recommendations; finally, we present a table with the 79 individual recommendations that are discussed in the chapters. Priority Recommendations The pane] selected these recommendations from the large num- ber of detailed recommendations as those that should be given prior- ity because they will provide the data most urgently needed for health policy for an aging society. The priority recommendations consist of both parts and combinations of recommendations that appear in the chapters. The recommendations are presented in the context of the policy areas they address and are followed by the rationale for each recommendation. Financing of Medical Care: For the aging population, the major policy issues that wiB confront the United States during the next decade are the cost of supplying health care to the elderly, who wiB pay for that care, and how it wiB be financed. Policy development for these issues requires trend data on the health expenditures of the elderly and also longitudinal data on the use of medical care as a person ages. In addition, evaluation of policy questions related to the Medicare program would be facilitated by improved access to the Medicare statistical system. Priority Recommendation 1: The panel recommends (a) continuation of the periodic survey of national medical care expenditures, the periodicity to be determined in relation to policy needs and timing of other health-related surveys and

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INTRODUCTION AND SUMMARY OF RECOMMENDATIONS (b) that the population age 55 and over in the 1987 survey be identified and followed by linking to administrative records, including Medicare reimbursements from Health Care Fi- nancing Administration records, and, to the extent feasi- ble, Medicaid reimbursements from state record systems and work history and pension benefits from Social Security Ad- ministration records. In addition, the National Death Index of the National Center for Health Statistics and state health department death records should be used to identify the year and cause of death of each sampled person. Priority Recommendation 2: The panel recommends that the Health Care Financing Administration develop files de- signed for easy access to the Medicare Statistical System (including the Medicare Automated Data Retrieval System) that would facilitate use by researchers for policy analysis related to the Medicare program. 11 Trend data on health expenditures for the elderly. National health expenditure data are widely used by policy makers to evaluate the extent of coverage of existing public programs, such as Medicare and Medicaid, and to estimate the total health care costs of the elderly population by type of expenditure and source of funds. The data also serve as a basis for assessing the possible consequences of changes in public policy programs. The major sources of such data have been the 1980 National Medical Care Utilization and Ex- penditures Survey (NMCUES) and the 1977 National Medical Care Expenditures Survey (NMCES). These surveys and the Medicare files are the primary data sources for estimating cost and coverage of program changes, such as the various proposals for catastrophic health care coverage currently being considered by Congress. More current data will become available in 1988 from the ongoing 1987 Na- tional Medical Expenditure Survey (NMES). The 1980s have been and continue to be a decade of far-reaching changes in the structure of the health care delivery system, private health insurance, federal and state and local health care programs, as well as in the demo- graphic composition of the nation. How these changes affect the kinds and amounts of health care Americans use, how they will pay for it, and the implications of further changes in health care policy are questions that NMES data and the analyses based on them will help to answer.

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