Download Indicator 1 - Number of Older Americans

The State of HME:
Demographics, Figures &
Projections Affecting the
HME Industry
Compiled and Edited by Mark J. Higley, VGM Group
August, 2003
Age
The growth of the population age 65 and older affects every aspect of our society,
presenting challenges as well as opportunities to our policymakers, families, businesses,
and, of course, homecare providers. Here’s some detail:

There are an estimated 36 million people age 65 or older in the United States,
accounting for almost 13 percent of the total population. The number of older
Americans has increased more than ten-fold since 1900, when there were 3
million people age 65 or older (4 percent of the total population).

Despite the growth of the older population, the United States is a relatively young
country when compared with other developed nations. In many industrialized
countries, older persons account for 15 percent or more of the total population.

In 2011, the “baby boom” generation will begin to turn 65, and by 2030, it is
projected that one in five people will be age 65 or older. The size of the older
population is projected to double over the next 30 years, growing to 70 million by
2030.

As in most countries of the world, there are more older women than older men in
the United States, and the proportion of the population that is female increases
with age. In 2000, women are estimated to account for 58 percent of the
population age 65 and older and 70 percent of the population age 85 and older.

The population age 85 and older is currently the fastest growing segment of the
older population. An estimated 2 percent of the population is now age 85 and
older. By 2050 the percentage in this age group is projected to increase to almost
5 percent of the U.S. population, or about 19 million. Some researchers predict
that death rates at older ages will decline more rapidly than reflected in the
Census Bureau’s projections, which could result in faster growth of this
population. The size of this age group is especially important for the future of the
homecare industry, because these individuals tend to be in poorer health and
require more services than the younger old.
As you would expect, the proportion of the population age 65 and older varies among
states. This proportion is partly affected by the state mortality rate and the number of
older persons who migrate to a state. It is also affected by the number of younger persons
who move to other states. Today, the states with the highest proportions of older persons
are Florida, West Virginia, Pennsylvania, Iowa, and North Dakota.
From 1950 to 2000 the total resident population of the United States increased from 150
million to 281 million representing an average annual growth rate of about 1 percent.
During the same time period, the elderly population (65 years of age and over) grew
twice as rapidly. Projections indicate that the total population will increase more slowly
over the next 50 years and the elderly population will increase more rapidly.
There are about 65,000 people age 100 or older in 2000, and the number of centenarians
is projected to grow quickly so that there may be as many as 381,000 by 2030!
During the past 50 years, the U.S. population has grown older. From 1950 to 2001 the
percent under 18 years of fell from 31 percent to 26 percent while the percent elderly
rose from 8 percent to 12 percent. From 2002 to 2050 a small decline in the percent of
the population under 18 years of age is anticipated, while a sizeable increase in the
percent elderly is expected. As the ‘‘baby boom’’ generation turns 65, beginning in
2011, the size of the elderly population will grow substantially. By 2050 it is projected
that one in five Americans will be elderly.
Today Americans enjoyed the longest life expectancy in U.S. history – almost 77 years.
The life expectancy of men is 74 years and for women almost 80 years. A century earlier,
life expectancy was 48 years for men and 51 years for women.
Men and women who reach age 65 now live, on average, to ages 81 and 84, respectively.
For older Americans, the increase in life expectancy is largely due to the sharp drop in
deaths from heart disease and stroke.
U.S. HME (DME) Expenditures
NHE: Total Expenditure, By Provider, 1970 - 2010
$800,000,000
$700,000,000
$600,000,000
Hospital
$500,000,000
Physician
Home Health Care
$400,000,000
Pharmacy
Nursing Home
$300,000,000
HME
$200,000,000
$100,000,000
$0
NHE: Total DME Expenditures, 1970 - 2010
$35,000,000
$30,000,000
$25,000,000
$20,000,000
DME
$15,000,000
$10,000,000
$5,000,000
$0
1970
1980
1990
2000
2010
Overall, Americans spent $1.3 trillion on health care in 2000, or 13.2 percent of the
gross domestic product, far more than any other nation.
Approximate national health expenditures are as follows: one-third of every health care
dollar was spent on hospital care, one-fifth on physicians, one-tenth on prescription
drugs, and about 1.5% on home medical equipment and supplies. Most certainly, the
aging of the population has important consequences for our homecare industry. As the
elderly fraction of the population increases, more homecare equipment and services will
be required for the treatment and management of chronic and acute health conditions.
NHE: Percentage Growth, By Provider, 1980 - 2010
600%
500%
All Providers
400%
Hospital
Physician
300%
Home Health Care
Pharmacy
Nursing Home
200%
HME
Nursing Home
Pharmacy
100%
HME
Home Health Care
Physician
Hospital
0%
1980
1990
All Providers
2000
2010
Note: Home Health 1980 Actual Value
980%
Note that estimated HME expenditure increases, by percentage, for 2010 remain
relatively constant with hospital and nursing home projections, or about an increase of 70
– 80%. This is equal to an estimated a $32 billion projection.
Total NHE
2010
2000
1990
1980
$2,639,226,000,000
$1,299,463,000,000
$695,999,000,000
$245,758,000,000
Hospital
$737,280,000,000
$412,103,000,000
$253,918,000,000
$101,549,000,000
Physician
$559,442,000,000
$286,439,000,000
$157,539,000,000
$47,073,000,000
Home Health Care
$66,379,000,000
$32,426,000,000
$12,567,000,000
$2,378,000,000
Prescription Drugs
$376,006,000,000
$121,808,000,000
$40,290,000,000
$12,049,000,000
Nursing Home
$157,401,000,000
$92,247,000,000
$52,705,000,000
$17,674,000,000
$32,109,000,000
$18,537,000,000
$10,606,000,000
$3,863,000,000
HME
NHE - PROJECTED INCREASE
2010
Total NHE
103.10%
Hospital
78.91%
Physician
95.31%
Home Health Care
104.71%
Rx Prescription Drugs
208.69%
Nursing Home
70.63%
HME
73.22%
National Health Expenditures and Selected Economic Indicators, Levels and
Average Annual Percent Change:
Calendar Years 1980-2011
Projected
Item
National
Health
Expenditure
s (billions)
National
Health
Expenditure
s as a % of
GDP
1980
1990
$245.8 $696.0
8.8
1995
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
$990.3 $1,149.8 $1,215.6 $1,299.5 $1,423.8 $1,545.9 $1,653.4 $1,773.4 $1,902.2 $2,036.6 $2,174.9 $2,320.0 $2,476.1 $2,639.2 $2,815.8
12.0
13.4
13.1
13.1
13.2
14.0
14.7
15.0
15.3
15.6
15.8
16.1
16.3
16.5
16.8
17.0
National
Health
Expenditure
Per Capita
$1,067 $2,738
$3,698
$4,177
$4,377
$4,637
$5,039
$5,427
$5,757
$6,126
$6,519
$6,926
$7,338
$7,768
$8,228
$8,704
$9,216
Gross
Domestic
Product
(billions)
$2,795 $5,803 $7,400.5 $8,781.5 $9,268.6 $9,872.9 $10,201. $10,509. $11,043. $11,612. $12,227. $12,880. $13,546. $14,247. $14,984. $15,754. $16,589.
Gross
Domestic
Product
(billions of
1996 $)
$4,900 $6,707
$7,543
$8,508.
$8,856.
$9,224.
$9,316.
$9,381.
$9,622.
$9,855. $10,086. $10,309. $10,516. $10,727. $10,943. $11,159. $11,398.
Gross
Domestic
Product
Implicit
Price
Deflator
0.570
0.865
0.981
1.032
1.046
1.070
1.095
1.120
1.148
1.178
1.212
1.249
1.288
1.328
1.369
1.412
1.455
Consumer
Price Index
(CPI-W) 1982-1984
base
0.824
1.307
1.524
1.630
1.666
1.722
1.773
1.824
1.878
1.936
1.998
2.064
2.132
2.202
2.275
2.350
2.428
HCFA
Implicit
Medical
Price
Deflator
0.377
0.775
0.971
1.044
1.073
1.109
1.152
1.196
1.239
1.285
1.334
1.386
1.440
1.496
1.556
1.618
1.683
U.S.
Population
(millions)
230.4
254.2
267.8
275.2
277.7
280.2
282.5
284.9
287.2
289.5
291.8
294.1
296.4
298.7
300.9
303.2
305.5
Population
age less than
65 years
204.6
222.7
233.9
240.5
242.9
245.1
247.3
249.5
251.6
253.6
255.6
257.5
259.3
260.9
262.5
264.2
265.7
Population
age 65 years
and older
25.8
31.5
33.9
34.7
34.9
35.1
35.2
35.4
35.6
35.9
36.2
36.5
37.1
37.7
38.4
39.0
39.8
SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary.
HME Expenditures Aggregate and per Capita Amounts, Percent
Distribution and Average Annual Percent Change by Source of Funds:
Selected Calendar Years 1980-2011
Third-Party Payments
Public
Year
Out-ofPocket
Total Payments
Historical
Estimates
Amount in Billions
Private
Health
Total Insurance
Other
Private
Funds
State
and
Total Federal Local
Medicare Medicaid
1980
$3.9
$2.7
$1.1
$0.6
--
$0.5
$0.4
$0.1
$0.3
--
1990
10.6
6.9
3.7
1.5
--
2.2
2.0
0.1
1.8
--
1995
14.2
7.7
6.5
2.6
--
4.0
3.8
0.1
3.5
--
1998
16.5
8.6
7.9
3.1
--
4.8
4.7
0.1
4.2
0.0
1999
17.6
9.1
8.4
3.4
--
5.1
4.9
0.2
4.4
0.0
2000
18.5
9.6
8.9
3.6
--
5.3
5.1
0.2
4.6
0.0
2001
19.9
10.2
9.6
4.0
--
5.7
5.5
0.2
4.9
0.0
2002
21.1
10.9
10.2
4.2
--
5.9
5.7
0.2
5.1
0.0
2003
22.2
11.5
10.8
4.4
--
6.3
6.1
0.2
5.4
0.0
2004
23.5
12.1
11.4
4.7
--
6.8
6.5
0.2
5.8
0.0
2005
24.8
12.7
12.1
4.9
--
7.2
7.0
0.2
6.2
0.0
2006
26.0
13.2
12.8
5.1
--
7.7
7.5
0.2
6.7
0.0
2007
27.3
13.8
13.5
5.2
--
8.3
8.0
0.2
7.2
0.0
2008
28.7
14.4
14.3
5.4
--
8.9
8.6
0.3
7.8
0.0
2009
30.4
15.1
15.3
5.7
--
9.6
9.3
0.3
8.5
0.0
2010
32.1
15.8
16.3
5.9
--
10.4
10.1
0.3
9.2
0.0
2011
33.9
16.5
17.3
6.1
--
11.2
10.9
0.3
10.0
0.0
Projected
SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary.
Miscellaneous U.S. Health “Quick Facts”
Three in five adults ages 20-74 are overweight. One in four Americans is considered
obese. Almost 40 percent engaged in no physical activity during leisure time, and women
were more sedentary than men. One in 10 Americans age 45-54, 1 in 5 of those 55-64
years, 1 in 4 of those 65-74 years, and 1 in 3 of those 75 years and over reported being in
fair or poor health.
Hospital stays keep getting shorter: just 4.9 days on average in 2000. Twenty years ago
patients spent more than 7 days in the hospital. Sixty-three percent of all surgeries now
are performed as outpatient procedures, with patients being sent home after a short stay in
a recovery room. A decade earlier, one-half of all surgeries were on outpatients. In 1980
only 16 percent were done on outpatients.
Federal and State government programs – principally Medicare and Medicaid – paid 43
percent of all medical bills. Private insurance covered 35 percent, and other private
sources paid 5 percent. Consumers paid 17 percent out of their own pockets.
Major HME Markets.
The Respiratory Market
CMS figures project that during the next decade millions of baby boomers will reach
Medicare age. Between now and when the first baby boomer turns 65, however,
Americans will report more than 170 million new cases of asthma and as many as 150
million cases of bronchitis, according to the National Center for Health Statistics in
Hyattsville, Md. More than 2 million Americans currently receive some type of oxygen
therapy at home.
According to a new report from the market research firm Kalorama Information, the
current $464.5 million industry should grow at an annual rate of 7.8 percent during the
next four years, and will reach an annual revenue of $677.4 million by 2006.
VGM member Mike Kuller, president of Allstar Oxygen Services in Concord, Calif., was
recently interviewed by an industry publication. In the article, Mike suggested that the
Kalorama study might be selling the market's potential short. “I see tremendous growth
driven by an aging population, so I think that [Kalorama's] statistics are probably
underestimated”, he noted. Further Mike pointed out that Allstar's CPAP population has
grown 50 percent during the past six months, and his oxygen patient population has
grown 30 percent. Other VGM members who have reviewed the report suggest that
Kalorama is underestimating the size and growth potential of the oxygen market, and that
could be affecting the firm's overall growth predictions. Despite insisting that oxygen
patients' desire for mobility is a primary force driving revenue in the home respiratory
equipment market, Kalorama predicts only modest growth for portable oxygen systems:
3.2 percent annually between now and 2006.
Generally, the firm's predictions for oxygen concentrators are positive. Recovering from
the 1997 reimbursement cuts that drove down prices, the oxygen concentrator market
may see a 7.3 percent annual growth between now and 2006, according the report.
The home respiratory market is growing steadily, “as the forces driving this market
overshadow reimbursement woes, predicting growth for a market that includes devices to
treat sleep-disordered breathing may be nearly impossible right now”, suggest industry
experts.
While as many as 12 million Americans suffer from sleep apnea, 80 percent to 90 percent
of these people have not yet been clinically diagnosed. Awareness about the far-reaching
implications of sleep apnea is increasing, and government research findings recently
prompted Medicare to extend the coverage of CPAP devices to include mild and
moderate sleep apnea.
Also driving the ventilator market is the trend toward sending hospital ventilator patients
home sooner. Some managed care organizations are setting a limit of five weeks of
hospitalization for a ventilated patient. For the ventilator market, these developments
mean rapid growth, to 10.2 percent annually during the next four years. In 2002, the
market approximated $116.8 million; by 2006, $189.8 million, according to Kalorama.
U.S. Home Respiratory Projections
$800,000,000
$600,000,000
Kalorama
Information
Projected Sales
$400,000,000
2006
2005
2004
2003
$0
2002
$200,000,000
The Mobility Market
The mobility market is one of the largest in our industry. Market research firm Frost &
Sullivan is predicting that, by 2008, the mobility market will generate more than $1
billion in annual revenue, an increase of $244 million, or 23.4 percent, from the $766
million in revenue generated in 2001.
In addition, the mobility market is one of the most expansive as well — from manual and
power wheelchairs, to walkers and rollators, to scooters and ramps, not to mention the
companion product category of seating and positioning, which is large in its own right.
U.S. Mobility Projections
$1,200,000,00
0
$1,000,000,00
0
$800,000,000
$600,000,000
$400,000,000
$200,000,000
$0
2001 2002 2003 2004 2005 2006 2007 2008
Infusion
Growing at an annual rate of 10.3 percent, the U.S. infusion products market should,
between now and 2006, outpace all other home care segments, also according to a recent
report from Kalorama Information.
The report, entitled "The U.S. Market for Home Care Products," defined infusion
products as ambulatory infusion pumps, nutritional supplements and pharmaceuticals,
and said that, in 2001, these products generated a revenue of $815 million. Consequently,
if Kalorama's growth predictions are correct, infusion products will generate a revenue of
$1.33 billion in 2006, more than the respiratory and mobility markets combined.
U.S. Infusion Projections
$1,400,000,000
$1,200,000,000
$1,000,000,000
$800,000,000
$600,000,000
$400,000,000
$200,000,000
$0
2001
2002
2003
2004
2005
2006
Outlook
At VGM, we believes that sales of HME products will continue to grow during the next
decade as a result of several factors, including:
Favorable Business Conditions. Interest rates are the lowest in years. Capital intensive
HME businesses require credit. In 2001, a full Cost of Living Allowance was
implemented. And, the recent approval of the ABN process allows new choices for
consumers and additional opportunities for providers.
Growth in population over age 65. The nation's overall life expectancy continues to
increase, and the current life expectancy based on 2001 data is now an all-time high of
approximately 76.7 years. More than 13% of the U.S. population is 65 or older, and this
percentage is expected to increase to 20% by 2030. The over-65 age group represents the
vast majority of home health care patients and continues to grow. A significant
percentage of people using home and community-based health care services are also 65
years of age and older.
Treatment trends. We believe that many medical professionals and patients will continue
to prefer home health care over institutional care. Homecare results in greater patient
independence, increased patient responsibility and improved responsiveness to treatment
because familiar surroundings are conducive to improved patient outcomes. Health care
professionals, public payers and private payers agree that home care is a cost effective,
clinically appropriate alternative to facility-based care. Recent surveys show that
approximately 70% of adults would rather recover from accident or illness in their home,
while approximately 90% of the older population showed preference for home-based
long-term care.
Technological trends. Technological advances have made HME increasingly adaptable
for use in the home. Current hospital procedures often allow for earlier patient discharge,
thereby lengthening recuperation periods outside of the traditional institutional setting. In
addition, continuing medical advances prolong the lives of adults and children, thus
increasing the demand for home medical care equipment.
Healthcare cost containment trends. As noted, spending on health care in the U.S. totals
$1.3 trillion dollars, approximately 13% of the Gross Domestic Product (GDP), the
highest among industrialized countries. In 2007, the nation's health care spending is
projected to increase to $2.1 trillion; averaging annual increases of 7%. Over this same
period, spending on health care is expected to increase to approximately 17% as a share
of GDP. The rising cost of health care has caused many payers of health care expenses to
look for ways to contain costs. Home health care has gained wide-spread acceptance
among health care providers and public policy makers as a cost effective, clinically
appropriate and patient preferred alternative to facility-based care for a variety of acute
and long-term illnesses and disabilities. Home health care and home medical equipment
will play a significant role in reducing health care costs.
Society's mainstreaming of people with disabilities. People with disabilities are part of
the fabric of society, and this has increased, in large part, due to the Americans with
Disabilities Act, which became law in 1991. This legislation provides mainstream
opportunities to people with disabilities. The Americans with Disabilities Act imposes
requirements on certain components of society to make reasonable accommodations to
integrate people with disabilities into the community and the workplace.
The percentages of people with disabilities increase sharply with age (Figure 8).
Disability takes a much heavier toll on the very old. Almost three-fourths (73.6%) of
those aged 80+ report at least one disability. Over half (57.6%) of those aged 80+ had
one or more severe disabilities and 34.9% of the 80+ population reported needing
assistance as a result of disability. There is a strong relationship between disability
status and reported health status. Among those 65+ with a severe disability, 68.0%
reported their health as fair or poor. Among the 65+ persons who reported no disability,
only 10.5% reported their health as fair or poor. Presence of a severe disability is also
associated with lower income levels and educational attainment.