Health Care Spending Growth Has Slowed: Will the Bend in the Curve Continue?

Sheila D. Smith, Joseph Newhouse and Gigi A. Cuckler

No 30782, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Over 2009-2019 the seemingly inexorable rise in health care’s share of GDP markedly slowed, both in the US and elsewhere. To address whether this slowdown represents a reduced steady-state growth rate or just a temporary pause we specify and estimate a decomposition of health care spending growth. The post-2009 slowdown was importantly influenced by four factors. Population aging increased health care’s share of GDP, but three other factors more than offset the effect of aging: a temporary income effect stemming from the Great Recession; slowing relative medical price inflation; and a possibly longer lasting slowdown in the nature of technological change to increase the rate of cost-saving innovation. Looking forward, the post-2009 moderation in the role of technological change as a driver of growth, if sustained, implies a reduction of 0.8 percentage points in health care spending growth; a sizeable decline in the context of the 2.0 percentage point differential in growth between health care spending and GDP in the 1970 to 2019 period.

JEL-codes: I1 (search for similar items in EconPapers)
Date: 2022-12
New Economics Papers: this item is included in nep-hea
Note: EH
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