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The sustainability of health spending growth

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  • Glenn Follette
  • Louise Sheiner

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.

Suggested Citation

  • Glenn Follette & Louise Sheiner, 2005. "The sustainability of health spending growth," Finance and Economics Discussion Series 2005-60, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2005-60
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    References listed on IDEAS

    as
    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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    Keywords

    Medicare ; Public health - Economic aspects;

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