Prescription drugs and the changing concentration of health care expenditures

Abstract

Health care expenditures are highly concentrated in the United States, with a small fraction of the population accounting for a large share of total health spending. This concentration has proved remarkably stable over time; however, the degree of concentration has declined over the past decade. Using data from the 1996-2003 Medical Expenditure Panel Survey (MEPS), we explore why. We find that rapid growth in prescription drug spending, which is diffused over a large fraction of the population, versus slower growth in spending for inpatient care largely accounts for the recent change in concentration. We discuss the potential implications for current cost containment and reform efforts.