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Insurance effects on US medical spending (1960-1993)


  • Edgar A. Peden

    (Office of Strategic Planning, Health Care Financing Administration, Baltimore, MD, USA)

  • Mark S. Freeland

    (Office of the Actuary, Health Care Financing Administration, Baltimore, MD, USA)


Regression results show that nearly half of 1960-1993 growth in real per capita medical spending and almost two-thirds of its 1983-1993 growth were due to ever-increasing levels of insurance coverage (the spending portion paid by third parties). Growth in coverage may have played a minor part as well; we would not rule out the standard finding that it has had a positive but relatively small effect. Viewed from a different perspective, the results imply that about two-thirds of 1960-1993 spending growth came via cost-increasing advances in medical technology resulting from: (1) commercial research and development induced by coverage levels and (2) noncommercial medical research. The remaining one-third, was due to standard factors: age-sex mix changes, income growth and coverage growth (the latter playing a small but indeterminate part).Copyright © 1998 John Wiley & Sons, Ltd.

Suggested Citation

  • Edgar A. Peden & Mark S. Freeland, 1998. "Insurance effects on US medical spending (1960-1993)," Health Economics, John Wiley & Sons, Ltd., vol. 7(8), pages 671-687.
  • Handle: RePEc:wly:hlthec:v:7:y:1998:i:8:p:671-687
    DOI: 10.1002/(SICI)1099-1050(199812)7:8<671::AID-HEC379>3.0.CO;2-9

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    Cited by:

    1. Karine Lamiraud & Stephane Lhuillery, 2016. "Endogenous Technology Adoption and Medical Costs," Health Economics, John Wiley & Sons, Ltd., vol. 25(9), pages 1123-1147, September.
    2. Wong, Albert & Wouterse, Bram & Slobbe, Laurentius C.J. & Boshuizen, Hendriek C. & Polder, Johan J., 2012. "Medical innovation and age-specific trends in health care utilization: Findings and implications," Social Science & Medicine, Elsevier, vol. 74(2), pages 263-272.
    3. Adam, Taghreed & Evans, David B., 2006. "Determinants of variation in the cost of inpatient stays versus outpatient visits in hospitals: A multi-country analysis," Social Science & Medicine, Elsevier, vol. 63(7), pages 1700-1710, October.
    4. Svetlana N. Beilfuss & James A. Thornton, 2016. "Pathways and Hidden Benefits of Healthcare Spending Growth in the U.S," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 44(3), pages 363-375, September.

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