A Cross-Country Analysis of Health Care Expenditures
This paper is concerned with growth patterns of US health care expenditures. Within a representative sample of OECD countries, we lay out a growth accounting exercise for health care expenditures to assess the influence of several explanatory variables. Our analysis demonstrates that the relative price of medical care and some health care laws can trace down fairly well the differential increase in US medical expenditures over the period 1970-2007. We then explore some major factors driving US medical care prices - including prescription drugs, the degree of competition, malpractice, and out-of-pocket expenditures. Some other explanatory variables - income growth, technological change, life expectancy, physicians' compensation, trends in aging population, and defensive medicine - would seem unable to account for the differential increase in US medical expenditures over various time periods.
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