Increased spending on health care: long-term implications for the nation

Abstract

This paper updates one we published in 2003, describing the implications of continued health care spending growth for the consumption of nonhealth goods and services. Our estimates now show that at approximately long-run average rates of excess health spending growth, 119 percent of the real increase in per capita income would be devoted to health spending over the 2007-2083 projection period. We argue that an alternative scenario, under which health spending grew just one percentage point faster than real per capita income, is "affordable," although 53.6 percent of real income growth over the period would go to health care. Moreover, even with the more favorable assumption, the nation would still face important challenges paying for care and dividing up the burden. This analysis thus supports the argument that reforms that would dramatically slow the rate of health care spending growth are necessary, especially if the nation hopes to maintain a reasonable amount of consumption of nonhealth goods and services.