Technology Assessment of the
U.S. Assistive Technology Industry

Potential Future Funding Bottlenecks

Can an upward spiral of federal and state funding support for health care funding (including subsidies for people with disabilities to acquire AT devices) be sustained? There is no certain answer to this question at this time. What is clear is that the shift in the demographic makeup of the U.S. population towards a much older society virtually ensures that demand for AT devices and services will grow substantially. This is likely to place unprecedented demands on state and federal public assistance programs.

The U.S. Government’s ability to support major increases in funding for health care programs, including subsidies for AT products and services, likely will be strained as federal agencies compete for budget authority. At this time, 55 percent of the federal budget is obligated to entitlement programs — with Medicare and Medicaid now accounting for 19 percent of all federal expenditures (see chart below). Annual payments on the national debt account for another 9 percent of the federal budget today, a figure that rises with interest rate hikes and/or increases in national indebtedness.

Textual Description of Chart

Mandatory program spending is projected to grow at twice the rate of discretionary accounts between 2002 and 2006. While discretionary account budgets are projected to grow 11.3 percent during this period, mandatory spending on programs such as Social Security, Medicare, Medicaid and others will jump 22.7 percent, excluding interest payments on the national debt, according to the Office of Management and Budget.

Thus, any real growth (as a percent of the U.S. budget) in federal healthcare programs to increase support for assistive technology for people with disabilities may be difficult in the future. Funding would likely have to come from defense or non-defense discretionary accounts, which have sustained significant reductions as a percent of the federal budget over the last decade.

What does this mean for the U.S. AT industry? There is no doubt that overall federal outlays for Medicare, Medicaid, and other programs will increase–as will overall subsidies for AT products. But any expectations for expanding the scope of AT goods that qualify for AT subsidies — or increasing the level of subsidies allowed for classes of AT products — may have to be tempered.

In the face of a major rise in reimbursement claims in the years ahead, the challenge for federal and state agencies and private insurers will be to set priorities in meeting the needs of people with disabilities and to strike a balance on reimbursement payments. Indeed, it may be necessary in the future to reduce payment levels on some AT devices — or remove some affordable AT products from government and private insurance reimbursement schedules — to keep both public assistance programs and private insurance coverage for AT services viable and solvent.