Cecily O'Connor
RedwoodAge.com

The rising  medical needs of aging boomers could bust the health care system by 2017, when the oldest members turn 71. 

That's according to a report by management consulting firm Tefen USA which details how health care spending may be more than double current estimates as hospital capacity declines and boomer medical needs skyrocket. A separate study, from Fidelity Investments, estimates that the average couple will need $225,000 to cover their share of medical costs after retirement.

A recent report by the Centers for Medicare and Medicaid Services found that total US health care spending is on track to reach $4.3 trillion by 2017, making up nearly one-fifth of the nation's gross domestic product. However, Barry Calogero, president of Tefen USA and author of the study, said he thinks this figure will likely be much higher. 

Calogero based that on an assessment of data that people over 65 spend nearly three times as many days in the hospital as the general population. The risk of developing a chronic disease increases with age: 62 percent of 50- to 64-year-olds report having at least one of six chronic health conditions - arthritis, high cholesterol, cancer, diabetes, heart disease and hypertension.

Compounding the problem is a sharp decline in hospital capacity. The number of community facilities decreased to 4,915  from 5,384 between 1990 and 2000. The number of beds per 1,000 Americans decreased to 3.0 from 4.2 during the same period. While the reduction was accompanied by an increase in hospital staffing and spending on facility and infrastructure improvements, there remain significant gaps in the health care system that need to be addressed, Calogero said. 

"There is an immense, growing disconnect within the US health care sector," he said. "Capacity is shrinking, costs are skyrocketing, and the patient population is about to explode. Our nation must bring these disparate factors into alignment ..."

Future Challenges
When it comes to aging, health care is one of the biggest issues boomers face. Their concern spans many issues: from securing and paying for appropriate long-term care insurance to ensuring they don't lose health care benefits if they retire before Medicare eligibility kicks in at age 65. The bigger picture, meanwhile, is equally troubling, with the potential for quality of care in the US to decline in many ways.  

As boomer-induced health care costs grow, the Tefen report outlines several consequences:

• The problem of uninsured Americans will escalate if more employers reduce retiree health care coverage and trim health
  care coverage contributions;
• Health care quality will suffer, with "wide variation in treatments and big differences" in death rates and surgical complications;
• Federal spending on Medicare and Medicaid will increase, and could force politicians to raise taxes or cut other government programs;
• State budgets will be under pressure due to increased Medicaid costs, "compromising support" for education and other local initiatives; and
• There will be fewer dollars to spend on education, environmental protection, scientific research and national security.

While solutions such as single-payer systems have been introduced to combat the potential for problems outlined above, that approach does not address underlying cost and quality issues that could compromise the US health care system, said Calogero, who advocates mandating "best practices" and "driving systemic process improvement."  He also advocates tort reforms, a controversial area that would limit court payments to victims of malpractice.

Reform Efforts
Implementing tort reforms, he believes, could create health courts similar to the arbitration system utilized in dispute resolution, such as workers' compensation. Health courts would administer peer reviews and independent analysis of procedural errors - differentiating between human error and negligence - and determine damages proportionate to the mistakes. 

A best-practices system, meanwhile, would hold providers accountable for delivering health care using the "best known practices and protocols" to reduce variability and administer compensation that's directly tied to improving medical outcomes, according to the report.

"With fairly uniform medical pricing across the industry set by the government and private insurers, providers can optimize revenues only by increasing the number of procedures," Calogero said. "This perverse system creates immense variability in how care is delivered. It gives hospitals and doctors little incentive to consistently provide treatments that medical research has shown produce the best results."

Lastly, many opportunities exist to correct inefficiencies that come up in the care-giving process. As an example, Calogero cited a study which found only 25 percent of nurses' time was spent providing care in a patient's room. The rest was consumed with administrative chores.

"By removing redundant duties, implementing new, time-efficient systems and eliminating supply management tasks, we have demonstrated the ability to more than double the time nurses spend with patients, with attendant improvements in quality of care," Calogero said.