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Health Care Spending Growth

In: Handbook of Health Economics

Author

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  • Chernew, Michael E.
  • Newhouse, Joseph P.

Abstract

This chapter provides a conceptual and empirical examination of health care spending growth (as opposed to the level of health care spending). Given that an equilibrium spending level exists, spending growth requires some variable to change. A one-time change in such a variable (or a one-time policy intervention) will generate a new equilibrium spending level, though the length of the transition period will depend on switching costs and information lags. After the new equilibrium is established, spending growth will cease. Yet we observe persistent spending growth. This implies at least one continually changing variable and the variable most commonly identified as continually changing is medical technology, broadly defined. We review theoretical models related to spending growth, including some that treat technology as exogenous and others that treat technology as endogenous. We then review the empirical literature related to spending growth and medical technology.

Suggested Citation

  • Chernew, Michael E. & Newhouse, Joseph P., 2011. "Health Care Spending Growth," Handbook of Health Economics, in: Mark V. Pauly & Thomas G. Mcguire & Pedro P. Barros (ed.), Handbook of Health Economics, volume 2, chapter 0, pages 1-43, Elsevier.
    • Handle: RePEc:eee:heachp:2-1
    DOI: 10.1016/B978-0-444-53592-4.00001-3
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    Citations

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    Cited by:

    1. Frankovic, Ivan & Kuhn, Michael, 2018. "Health insurance, endogenous medical progress, and health expenditure growth," ECON WPS - Working Papers in Economic Theory and Policy 01/2018, TU Wien, Institute of Statistics and Mathematical Methods in Economics, Economics Research Unit.
    2. Davillas, Apostolos & Pudney, Stephen, 2020. "Using biomarkers to predict healthcare costs: Evidence from a UK household panel," Journal of Health Economics, Elsevier, vol. 73(C).
    3. Liu, Yiyan & Jin, Ginger Zhe, 2015. "Employer contribution and premium growth in health insurance," Journal of Health Economics, Elsevier, vol. 39(C), pages 228-247.
    4. Schünemann, Johannes & Strulik, Holger & Trimborn, Timo, 2022. "Optimal demand for medical and long-term care," The Journal of the Economics of Ageing, Elsevier, vol. 23(C).
    5. Boone, J. & Schottmuller, C., 2015. "Health Provider Networks, Quality and Costs," Discussion Paper 2015-005, Tilburg University, Center for Economic Research.
    6. Boone, J., 2013. "Does the Market Choose Optimal Health Insurance Coverage," Other publications TiSEM f7691fbf-f770-4714-b1b4-1, Tilburg University, School of Economics and Management.
    7. Böhm, Sebastian & Grossmann, Volker & Strulik, Holger, 2021. "R&D-driven medical progress, health care costs, and the future of human longevity," The Journal of the Economics of Ageing, Elsevier, vol. 18(C).
    8. Padraig Dixon & George Davey Smith & Stephanie von Hinke & Neil M. Davies & William Hollingworth, 2016. "Estimating Marginal Healthcare Costs Using Genetic Variants as Instrumental Variables: Mendelian Randomization in Economic Evaluation," PharmacoEconomics, Springer, vol. 34(11), pages 1075-1086, November.
    9. Frankovic, Ivan & Kuhn, Michael, 2023. "Health insurance, endogenous medical progress, health expenditure growth, and welfare," Journal of Health Economics, Elsevier, vol. 87(C).
    10. Stefan Fetzer & Stefan Moog, 2021. "Indicators for Measuring Intergenerational Fairness of Social Security Systems—The Case of the German Social Health Insurance," Sustainability, MDPI, vol. 13(10), pages 1-18, May.
    11. Boone, Jan, 2013. "Does the market choose optimal health insurance coverage?," CEPR Discussion Papers 9420, C.E.P.R. Discussion Papers.
    12. Yiyan Liu & Ginger Zhe Jin, 2013. "Employer Contribution and Premium Growth in Health Insurance," NBER Working Papers 19760, National Bureau of Economic Research, Inc.
    13. Rudi Rocha & Isabela Furtado & Paula Spinola, 2021. "Financing needs, spending projection, and the future of health in Brazil," Health Economics, John Wiley & Sons, Ltd., vol. 30(5), pages 1082-1094, May.
    14. Molly Frean & Mark Pauly, 2018. "Does High Cost-Sharing Slow the Long-term Growth Rate of Health Spending? Evidence from the States," NBER Working Papers 25156, National Bureau of Economic Research, Inc.
    15. Valeska Hofbauer-Milan & Stefan Fetzer & Christian Hagist, 2023. "How to Predict Drug Expenditure: A Markov Model Approach with Risk Classes," PharmacoEconomics, Springer, vol. 41(5), pages 561-572, May.
    16. Seidu Dauda & Abe C. Dunn & Anne E. Hall, 2019. "Are Medical Care Prices Still Declining? A Systematic Examination of Quality-Adjusted Price Index Alternatives for Medical Care," BEA Working Papers 0166, Bureau of Economic Analysis.
    17. Dauda, Seidu & Dunn, Abe & Hall, Anne, 2022. "A systematic examination of quality-adjusted price index alternatives for medical care using claims data," Journal of Health Economics, Elsevier, vol. 85(C).
    18. Mauro Laudicella & Paolo Li Donni & Kim Rose Olsen & Dorte Gyrd‐Hansen, 2022. "Age, morbidity, or something else? A residual approach using microdata to measure the impact of technological progress on health care expenditure," Health Economics, John Wiley & Sons, Ltd., vol. 31(6), pages 1184-1201, June.
    19. Atella, Vincenzo & Belotti, Federico & Depalo, Domenico & Piano Mortari, Andrea, 2014. "Measuring spatial effects in the presence of institutional constraints: The case of Italian Local Health Authority expenditure," Regional Science and Urban Economics, Elsevier, vol. 49(C), pages 232-241.
    20. Abeliansky, Ana Lucia & Strulik, Holger, 2019. "Long-run improvements in human health: Steady but unequal," The Journal of the Economics of Ageing, Elsevier, vol. 14(C).
    21. Lucarelli, Claudio & Nicholson, Sean & Tilipman, Nicholas, 2022. "Price Indices and the Value of Innovation with Heterogenous Patients," Journal of Health Economics, Elsevier, vol. 84(C).
    22. Volker Grossmann, 2021. "Medical Innovations and Ageing: A Health Economics Perspective," CESifo Working Paper Series 9387, CESifo.
    23. Lubotsky, Darren & Olson, Craig A., 2015. "Premium copayments and the trade-off between wages and employer-provided health insurance," Journal of Health Economics, Elsevier, vol. 44(C), pages 63-79.
    24. Laudicella, Mauro & Li Donni, Paolo, 2021. "The impact of supply-driven variation in time to death on the demand for health care," DaCHE discussion papers 2021:3, University of Southern Denmark, Dache - Danish Centre for Health Economics.
    25. Abe Dunn & Anne Hall & Seidu Dauda, 2022. "Are Medical Care Prices Still Declining? A Re‐Examination Based on Cost‐Effectiveness Studies," Econometrica, Econometric Society, vol. 90(2), pages 859-886, March.

    More about this item

    Keywords

    spending growth; inflation;

    JEL classification:

    • I19 - Health, Education, and Welfare - - Health - - - Other

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