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Health Aff (Millwood). 2009 Sep-Oct;28(5):1276-84. doi: 10.1377/hlthaff.28.5.1276.

Income, insurance, and technology: why does health spending outpace economic growth?

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  • 1Office of the Actuary, Centers for Medicare and Medicaid Services, Baltimore, Maryland, USA. ssmith2@cms.hhs.gov

Abstract

A broad consensus holds that increased medical capability-technology-is the primary driver of health spending growth. However, technology does not expand independently of historical context; it is fueled by rising incomes and more generous insurance coverage. We estimate that medical technology explains 27-48 percent of health spending growth since 1960-a smaller percentage than earlier estimates. Income (gross domestic product, or GDP) growth plays a critical role, primarily through the actions of governments and employers on behalf of pools of consumers. The contribution of insurance is likely to differ, with less of a push from increasing generosity of coverage and more of a push from changes in provider payment.

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