Keywords: Health spending, sustainability, Medicare, cost 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.
Full paper (156 KB PDF)
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Last update: December 19, 2005