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The Sustainability of Health Spending Growth

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  • Follette, Glenn
  • Sheiner, Louise

Abstract

We evaluate the long–run sustainability of health spending growth. Under the criterion that non–health consumption does not fall, 1 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.

Suggested Citation

  • Follette, Glenn & Sheiner, Louise, 2005. "The Sustainability of Health Spending Growth," National Tax Journal, National Tax Association;National Tax Journal, vol. 58(3), pages 391-408, September.
  • Handle: RePEc:ntj:journl:v:58:y:2005:i:3:p:391-408
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    References listed on IDEAS

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    1. Robert E. Hall & Charles I. Jones, 2007. "The Value of Life and the Rise in Health Spending," The Quarterly Journal of Economics, Oxford University Press, vol. 122(1), pages 39-72.
    2. Jagadeesh Gokhale & Kent Smetters, 2003. "Fiscal and generational imbalances: new budget measures for new budget priorities," Policy Discussion Papers, Federal Reserve Bank of Cleveland, issue Dec.
    3. Charles I. Jones, 2002. "Why Have Health Expenditures as a Share fo GDP Risen So Much?," NBER Working Papers 9325, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Zhao, Kai, 2014. "Social security and the rise in health spending," Journal of Monetary Economics, Elsevier, vol. 64(C), pages 21-37.
    2. repec:ipf:psejou:v:41:y:2017:i:1:p:85-108 is not listed on IDEAS
    3. Yonghong An & Kai Zhao & Rong Zhou, 2016. "Health spending and public pension: evidence from panel data," Applied Economics, Taylor & Francis Journals, vol. 48(11), pages 987-1004, March.
    4. Louise Sheiner, 2009. "Intergenerational aspects of health care," Finance and Economics Discussion Series 2009-38, Board of Governors of the Federal Reserve System (U.S.).
    5. Adam Hans, 2007. "Einkommenswachstum, steigende Gesundheitsausgaben und Finanzierung / Income Increase, Health Spending Growth and Financing," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 227(5-6), pages 565-577, October.
    6. Nicolas R Blancher & François Haas & John Kiff & Oksana Khadarina & Paul S. Mills & Parmeshwar Ramlogan & William Lee & Yoon Sook Kim & Todd Groome & Shinobu Nakagawa, 2006. "The Limits of Market-Based Risk Transfer and Implications for Managing Systemic Risks," IMF Working Papers 06/217, International Monetary Fund.
    7. Kai (Jackie) Zhao, 2011. "Social Security and the Rise in Health Spending: A Macroeconomic Analysis," 2011 Meeting Papers 1061, Society for Economic Dynamics.
    8. Borger, Christine & Rutherford, Thomas F. & Won, Gregory Y., 2008. "Projecting long term medical spending growth," Journal of Health Economics, Elsevier, vol. 27(1), pages 69-88, January.

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