Working Paper

The sustainability of health spending growth

Abstract: We evaluate the long-run sustainability of health spending growth. Under the criterion that non-health consumption does not fall, one percent excess cost growth appears to be an upper bound for the economy as a whole when the projection horizon extends over the century, although some groups would experience declines in non-health consumption. More generally, the increase in health spending as a share of income may lead to a significant expansion of public sector financing, as has been the case historically. Extrapolation of historical trends also suggests that higher health spending will lead to insurance contracts with lower out-of-pocket payment shares, putting further upward pressure on health care expenditures.

Keywords: Medicare; Public health - Economic aspects;

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2005

Number: 2005-60