Alarming Rise Seen in U.S. Health Care Tab : Spending: Medical costs could consume 32% of the nation’s economy by the year 2030, study says. Forecast could boost Clinton’s reform efforts.

Health care spending continues to rise at an alarming rate, and the nation’s medical bill could consume a staggering 32% of the entire economy by the time the baby boomers reach their 70s and 80s, a new government forecast warns.

In a separate study, the government also reported that in 1991, health care’s share of the gross domestic product--the nation’s total output of goods and services--jumped by a full percentage point and now accounts for 13.2% of the entire economy. It was the sharpest one-year increase in three decades.

The forecasts, unpublished estimates prepared by the Health Care Financing Administration and obtained by The Times, are certain to add momentum to efforts by the incoming Clinton Administration, Congress and others to thoroughly overhaul the nation’s health care delivery system. The report portrays a system that, if continued in its current form, will consume ever-increasing amounts for diagnostic tests, surgical procedures, pharmaceutical products, nursing homes and the like.

Under that system, spending is expected to reach $16 trillion by the year 2030, one-third of the nation’s economic output. The expanding share reflects a rapidly aging America in which the general economy grows more slowly, while the massive baby boom generation, those born between 1946 and 1965, drive the demand for more nursing home care and more reliance on federal programs such as Medicare, the forecast report said.

Major health reform “could alter fundamentally the whole nature of health expenditures,” according to the forecast of long-term outlays, which will be published in a future issue of the Health Care Financing Review.

A second unpublished report provides the complete--and financially grim--details of spending for 1991, when health care outlays surged 11.4%, while the overall economy grew a disappointing 2.8%.

Spending on hospitals, physicians and other health services soared to an average of $2,868 for every American in 1991, the last year for which complete records are available.

With health outlays accelerating in an otherwise stagnant economy, there has been a “dramatic change in (the) pressure health care costs are exerting on the nation’s resources,” the report said.

Total health care spending of $751.8 billion in 1991 is expected to balloon to $1.7 trillion by the century’s end, the HCFA estimates.

Although all categories of medical outlays are growing, the biggest surge in spending during 1991 came from Medicare, which helps pay the bills for Americans over 65 and the disabled of all ages, and Medicaid, a welfare program that pays medical costs for the poor.

Medicare spending rose 10.9%, reaching $120.2 billion. Medicaid, a combined federal-state program, spent $96.5 billion, a dramatic increase of 34.4% from the previous year. “Recent expansions in recipient eligibility, expanded outreach efforts by states to establish eligibility for qualified poor persons and the recession caused increases in the number of persons with coverage under the Medicaid program,” the report said.

Medicaid is a growing budgetary burden in many states, including California, where recession has cut tax revenues while demand for services keeps growing.

The Clinton Administration hopes to slow the growth of Medicare and Medicaid spending, using the savings to help pay for providing health insurance to the 36 million Americans who lack coverage, Donna Shalala, secretary-designate of the Department of Health and Human Services, told her confirmation hearing on Thursday.

However, doctors and hospitals already complain that the payments they receive from the government for Medicare and Medicaid fail to cover the full costs of treatment. This results in “cost-shifting,” with higher charges for patients covered by private insurance to make up for the losses on Medicare and Medicaid patients.

Clinton’s advisers are confident that they can devise a system to control spending while providing universal access to health insurance, but have not yet offered detailed plans. Their general approach focuses on “managed competition,” in which all Americans would be enrolled in networks of doctors and hospitals offering a basic, standard package of health benefits.

If this fails to slow inflation, the government would turn to a formal, fixed budget for total health outlays, using strict price regulation for doctors and hospital services.

The danger to society from rapidly rising health care spending is not the simple dollar amount, but instead, the ever-growing share of the economy consumed by one activity. If health care outlays grow at two or three times the general rate of economic expansion, there is less money available for other things: pay raises for workers, money for schools, police, parks and the myriad other private and public purposes.

Most of the strikes of the late 1980s were related to health care issues, as unions resisted management efforts to make workers pay a larger share of health care costs. But the success of the unions in keeping the health plans intact meant that workers were trading off potential wage increases.

The menace of rising health costs is “enormous,” said Ross Arnett, director of the Office of National Health Statistics, which prepared the government studies. “People have the feeling things are out of control and they’re not getting value for their dollars.”

Unlike many other areas of the economy, medical spending is “very labor-intensive and doesn’t lend itself to kind of things you gain efficiency from, like robotics,” said Arnett. “Even new science and technology tend to be labor-intensive.”

The latest piece of million-dollar machinery to perform a battery of delicate tests demands new groups of technicians and repair workers. The major categories of spending in 1991 included: hospital care, $288.6 billion; physicians’ services, $142 billion; drugs and disposable products, $60.7 billion; nursing home services, $59.9 billion; dentists’ services, $37.1 billion; and government public health activities, $24.5 billion.