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

Author

Listed:
  • Sheila D. Smith
  • Joseph P. Newhouse
  • Gigi A. Cuckler

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.

Suggested Citation

  • Sheila D. Smith & Joseph P. Newhouse & Gigi A. Cuckler, 2022. "Health Care Spending Growth Has Slowed: Will the Bend in the Curve Continue?," NBER Working Papers 30782, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30782
    Note: EH
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    Cited by:

    1. Abe C. Dunn & Lasanthi Fernando & Eli Liebman, 2023. "A Direct Measure of Medical Innovation on Health Care Spending: A Condition-Specific Approach," BEA Papers 0121, Bureau of Economic Analysis.

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    JEL classification:

    • I1 - Health, Education, and Welfare - - Health

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