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The ability to predict future health care costs reasonably accurately is critical to planning for the Centers for Medicare and Medicaid Services (CMS). The models used for such projections to date, however, are limited in terms of their capacity to take into account the complex array of factors likely to affect future spending. To improve CMS’s ability to map the effects on spending of such factors as medical breakthroughs and demographic trends, RAND Health developed the Future Elderly Model (FEM), a demographic-economic model framework of health spending projections that enables the user to answer “what-if” questions about the effects of changes in health status and disease treatment on future health care costs. What distinguishes the FEM from other models is its inclusion of a multidimensional characterization of health status, which allows the user to include a richer set of demographic controls as well as comorbid conditions and functional status. This report describes the development of the FEM and its application in four clinical areas: cardiovascular disease, the biology of aging and cancer, neurological disease, and changes in health care services. Beside those involved in planning at the Centers for Medicare and Medicaid Services, it should be of interest to health policy planners and health economists.

Table of Contents

  • Chapter One


  • Chapter Two

    Prospects for Medical Advances in the 21st Century

  • Chapter Three

    The Medical Expert Panels

  • Chapter Four

    The Future Elderly Model

  • Chapter Five

    Health Expenditures

  • Chapter Six

    Health Status

  • Chapter Seven

    The Health Status of Future Medicare-Entering Cohorts

  • Chapter Eight


  • Chapter Nine

    Usefulness to the Office of the Actuary

  • Chapter Ten


  • Appendix A

    Methods for Identifying and Quantifying Key Breakthroughs

  • Appendix B

    The Social Science Expert Panel

  • Appendix C

    Names And Affiliations of Experts

  • Appendix D

    Literature Search Strategies

The research described in the report was conducted by RAND Health for the Centers for Medicare and Medicaid Services.

This report is part of the RAND Corporation Technical report series. RAND technical reports may include research findings on a specific topic that is limited in scope or intended for a narrow audience; present discussions of the methodology employed in research; provide literature reviews, survey instruments, modeling exercises, guidelines for practitioners and research professionals, and supporting documentation; or deliver preliminary findings. All RAND reports undergo rigorous peer review to ensure that they meet high standards for research quality and objectivity.

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