Health Care Spending: What the Future Will Look Like

Studies | Health

No. 286
Wednesday, June 28, 2006
by Christian Hagist and Laurence J. Kotlikoff


  1. This study is based on Laurence Kotlikoff and Christian Hagist, "Who's Going Broke? Comparing Healthcare Costs in Ten OECD Countries," National Bureau of Economic Research, Working Paper No. 11833, December 2005.
  2. Friedrich Breyer and Volker Ulrich, "Gesundheitsausgaben, Alter and Medizinischer Fortschritt: eine Regressionsanalyse," Jahrbuch für Nationalökonomie und Statistik, Vol. 1, 2000, pages 1-17, and Meena Seshamani and Alastair Gray, "Healthcare Expenditures and Aging: An International Comparison," Applied Health Economics and Health Policy , Vol. 2, No. 1, 2003, pages 9-16, examine the growth of health expenditures in Germany, Japan and the United Kingdom.
  3. For an explanation of the methodology, see Laurence Kotlikoff and Christian Hagist, "Who's Going Broke?"
  4. The 1.9 factor is obtained by averaging the 10 country-specific ratios of A to B, where A is the 1970-2002 growth rate of real health care expenditures and B is the 1970-2002 growth rate of real GDP.
  5. Table A-II shows overall growth rates, in contrast to the per capita growth rates shown in Table A-I.
  6. See Table 5 in Laurence Kotlikoff and Christian Hagist, "Who's Going Broke?"
  7. See Joseph P. Newhouse, "Medical Care Costs: How Much Welfare Loss?" Journal of Economic Perspectives, Vol. 6, No. 3, 1992, pages 9-16; and Peter Zweifel, "Medical Innovation: A Challenge to Society and Insurance," Geneva Papers on Risk and Insurance: Issues and Practice, Vol. 28. No. 2, 2002, pages 194-202.
  8. As reported in Organization for Economic Coordination and Development, Health Data 2004, 3rd ed. (Paris: OECD, 2004).
  9. See OECD, Health Data 2004.
  10. For this point, see also Uwe E. Reinhardt, Peter S. Hussey and Gerald F. Anderson, "Cross-National Comparisons Systems Using OECD Data," Health Affairs, Vol. 21, No. 3, 2002, pages 169-181.
  11. For a discussion and an overview of several studies concerning income elasticities of health care expenditures, see Jennifer Roberts, "Sensitivity of Elasticity Estimates for OECD Healthcare Spending: Analysis of a Dynamic Heterogeneous Data Field," Health Economics, Vol. 8, No. 5, 1999, pages 459-472.
  12. See Table 3 in Laurence Kotlikoff and Christian Hagist, "Who's Going Broke?"
  13. From 1969 through 2003, Medicare spending per enrollee averaged an annual nominal growth rate of 9.0 percent, compared to 10.1 percent for the privately insured. See Karen Davis and Sara Collins, "Medicare at Forty," Health Care Financing Review, Winter 2005-2006, Vol. 27, No. 2, Table 2, page 57.
  14. Authors' calculations based on data from the Office of the Actuary, National Health Statistics, Centers for Medicare and Medicaid Services.

Read Article as PDF