The Future of Children, Princeton - Brookings: Providing research and analysis to promote effective policies and programs for children.

Modified personal health care expenditures (MPHCE) as used in this report include expenditures on hospital care, services of physicians, dentists, and other health professionals; prescription drugs; and other personal health care services and products (eyeglasses, hearing aids, and other medical equipment).⁹ For children ages 0 to 18 years, MPHC expenditures totaled $49.8 billion in 1987 (see table 1). (Detailed tabulations of expenditure patterns by age, type of service, and source of payment are presented in appendix tables A1-A4.) Per capita expenditures (mean expenditures per child) were $737 and varied considerably by the age of the child.

As shown in Table 1, for each age group, aggregate expenditures are the product of the population of the group, the proportion of the population with expenditures on medical care, and the mean expenditure for those with expenses. Although there are more than three times as many children in the 3- to 12-year-old age group as in the 0- to 2-year-old age group, aggregate expenditures for the 0- to 2-year-olds were 12% greater. This difference primarily reflects the fact that mean expenditures among 0- to 2-year-olds were more than three times as large as mean expenditures among 3- to 12-year-olds. Mean expenditures for adolescents (ages 13 to 18) were almost twice as large as mean expenditures for 3- to 12-year-olds but about two-thirds the level of mean expenditures on 0- to 2-year-olds. We explore some of the sources of these age-specific differences below.

In the aggregate, children 0 to 18 years of age constituted 28.2% of the noninstitutionalized population in 1987 but accounted for only 13.7% of modified personal health care expenditures. Per capita MPHCE for children was only 59% as large as adult per capita expenditures. Per capita expenditures of adults 19 to 64 years of age were slightly less than those of young children (ages 0 to 2) but substantially greater than per capita expenditures of children age 3 to 18. Per capita expenditures among the elderly (those at least 65 years of age) were, at $4,276, almost six times those of children. The elderly, as a group, consumed a disproportionate share of health care: although they accounted for 11.8% of the noninstitutionalized population in 1987, their expenditures accounted for 33.2% of the expenditures on personal health care by the noninstitutionalized population.¹⁰

For children 0 to 18 years of age, hospital services, both in- and outpatient, accounted for the largest share of modified personal health spending-$24.3 billion in 1987, representing 48.7% of all expenditures (Figure 1). Expenditures on physician services for children, both ambulatory and inpatient care, amounted to $11 billion in 1987 while dental care expenditures totaled $8.2 billion. Lesser amounts ($2.4 billion) were spent on nonphysician ambulatory care (including services rendered by home health agencies, optometrists, chiropractors, and podiatrists, among others), $2.1 billion on prescription drugs, and $1.3 billion on a miscellany of other personal health services including eyeglasses, hearing aids, other medical supplies and equipment, and similar items.

The distribution of expenditures among the different types of services varied considerably according to the age of the child (Figure 2). Among children 0 to 2 years old, inpatient hospital care accounted for almost 60% of all expenditures, and inpatient care by physicians accounted for another 17%. The high concentration of expenditures on inpatient services in this age group represents principally the care of sick newborns. Ambulatory care in physicians' offices and in hospital clinics and emergency rooms accounts for most of the rest of expenditures (18%) in this group.

In contrast, expenditures on ambulatory care account for a high proportion of MPHCE for those 3 to 12 years old. Expenditures for inpatient hospital care (21%) and physician services (4%) account for only 25% of expenditures in this age group, while ambulatory care, about equally divided between care in physicians' offices and hospital outpatient departments, accounts for almost 36% of all expenditures. For this age group, dental care at 22% of MPHCE is the largest single category of expense of those detailed in Figure 2. Prescription drugs and nonphysician ambulatory care are also important sources of expenditures. The relatively small proportion of expenditures for hospital care in this age group is probably responsible for the low per capita expenditures reported for 3- to 12-year-olds (Table 1).

As per capita costs increase among those 13 to 18 years of age relative to those 3 to 12 years old, so does the proportion of expenditures which goes to inpatient hospital care (29%) and inpatient physician care (7%). The higher per capita expenditures for inpatient care for 13- to 18-year-olds is in part attributable to pregnancy-related costs. In 1987, there were approximately 320,000 live births to girls less than 19 years old.¹¹ Based on the estimates of the mean cost of pregnancy-related health care services, we estimate that these births accounted for almost $1.24 billion in hospital-related obstetrical charges and almost $190 million in expenditures for inpatient care of healthy newborns.¹² Together these expenditures amounted to $70 per 13- to 18-year-old. Although a considerable amount, expenditures on pregnancy account for only about 30% of the difference between 13- to 18-year-olds and 3- to 12-year-olds in per capita expenditures for care in the hospital.

A hypothesis which requires further investigation is that the relatively high incidence of trauma associated with accidental injuries and violence in the 13- to 18-year-old group accounts for much of the increase in expenditures on their hospitalization. (See the article by Perrin, Guyer, and Lawrence in this journal issue.) In addition, as is true for 3- to 12-year-olds, 13- to 18-year-olds incur large expenditures for dental care. On average, 13- to 18-year-olds spend one and a half times as much on dental care as they do on ambulatory physician and ambulatory hospital care combined.

The distribution of MPHCE by type of service for adults (19 years and older) is also presented in Figure 1. A somewhat larger proportion of adult than child health care expenditures go to hospital care (54% versus 49%), while a somewhat higher proportion of children's expenditures go to physicians as compared with adults (22% versus 20%). These small differences between children and adults in the proportion of modified personal health expenditures that go to physicians and hospitals are almost entirely a result of the increase in inpatient hospital care by those 65 years of age and over. The shares of health expenditures going to physicians (22%) and hospitals (50%) among adults 19 to 64 years (not shown) are almost identical to the relative shares of expenditures on these types of services in the health care expenditures of children. Perhaps the most striking difference in the health care expenditure patterns of adults as compared to those of children is the much larger share of dental care expenditures in the health care budget of children. The most extreme difference exists between children ages 6 to 18, for whom dental care represents almost 30% of expenditures, and those 65 years of age and older (not shown), for whom dental care represents less than 3% of expenditures.