Health-Care Spending Growth Has Slowed

Sheila Diane Smith and Joseph P. Newhouse

American Journal of Health Economics, 2026, vol. 12, issue 1, 1 - 34

Abstract: The seemingly inexorable worldwide rise in health care’s share of GDP from 1970 to 2009 markedly slowed from 2009 to 2019, both in the US and across a broad cross section of 19 OECD countries. To assess whether this slowdown represents a reduced steady-state growth rate or a temporary pause, we estimate a decomposition of health-care spending growth with the residual defining the role of medical technology. Income and medical technology are the main drivers of health-care cost growth over the 1970–2019 period, accounting for 43 percent and 35 percent of the growth in the US, respectively, and 57 percent and 21 percent of the growth in the other 19 OECD countries. The time series for the 20-country residual shows a structural break in 2004 that reduces annual growth in health-care spending by an average of 1.1 percentage points, a key driver of the post-2009 slowdown in health-care spending. The slowdown was further deepened by the effects of the Great Recession and, in the US, reduced medical price inflation, partially offset by faster population aging in the US and in most other countries. Looking to 2028–38 to exclude pandemic aftereffects, our results imply some acceleration in growth but nonetheless a substantial bending of the curve.

Date: 2026
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