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Chapter 1: Rise of a Massive Health Sector
- 1.1 Growth in Health Spending, 1929 to Present
- 1.2 Growth in Inflation-Adjusted Health Output per Capita over 80 Years
- 1.3 Ever-Growing Health Share of Economy
- 1.4 US Spends the Most on Health among Countries
- 1.5 Health Spending Outgrew Economy
- 1.6 Health Spending Rose in All Advanced Countries
- 1.7 Big and Increasing Gap in Health Spending between US and Rest of the World
Chapter 2: How Is Each Health Dollar Spent?
- 2.1 Most Health Spending Is for Personal Services
- 2.2 Personal Health Spending Doubled Every 25 Years
- 2.3 Insurer Administrative Costs Decline in Group Size
- 2.4 Trends for Components of Health Spending, 1929 to 2009
- 2.5 Chronic Diseases Account for Big and Increasing Share of Health Spending
- 2.6 Half or More of Personal Health Spending Is Avoidable
Chapter 3: Who Pays for Health Services?
- 3.1 Role of Public Sector in US Health Financing Has Increased
- 3.2 Private Health Insurance Pays Less Than Public
- 3.3 Health Insurance Financed Growth in Health Spending
- 3.4 Federal Tax Subsidies for Health Exceed Federal Spending on Medicaid
- 3.5 Out-of-Pocket Share of Health Spending Declined
- 3.6 US Has among the Lowest Out-of-Pocket Share of Health Spending
- 3.7 The Elderly & the Disabled Account for Disproportionately Large Share of Medicaid Spending
- 3.8 Medicare Pays for Less than Half of Health Spending by Beneficiaries
- 3.9 The Uninsured Received Much Subsidized Care
Chapter 4: The Employer Rold in U.S. Health Care
- 4.1: Health-Related Employer Contributions Accounted for a Growing Share of Worker Compensation
- 4.2: High-Paid Workers Receive Larger Tax Subsidy for Employer-Provided Health Insurance
- 4.3 Small Firms Least Likely Offer Health Coverage to Employee
- 4.4 A Secular Decline In Employer-Based Health Coverage
Chapter 5: Government Health Expenditures, Taxes, and Deficits
- 5.1 Government Expenditures for Health, 1929-2009
- 5.1 Bonus Material: Contribution of Health to Growth in Government Spending
- 5.2 Health Component Grew the Fastest in Government Spending
- 5.3 US Health Share of Government Spending among G7 Counties
- 5.4 Public Sector Pays 80% Health Costs for People of Poor Health
- 5.5 Taxpayers Finance Almost Half of Health Spending for the Highest-Income Families
- 5.6 Medicare Beneficiaries Receive More Than They Pay
- 5.7 Medicaid Share of State Health Spending across States
Chapter 6: Health Services and the Family Budget
- 6.1 Health Care Is 2nd Largest Personal Consumption Component
- 6.2 Direct Family Health Care Spending Accounted for Only 5% Income
- 6.3 Health Care Payment Burden Grew Faster among Highest-Income Families
- 6.4 Elderly and Children Rely More Heavily on Tax-Financed Health Coverage
- 6.5 Young Adults Incur High Risk of Being Uninsured
- 6.6 American's Risk of Being Uninsured, 1940-2010
- 6.7 Majority of Health Costs for Uninsured People Are Subsidized
- 6.8 Elderly-Headed Households Spent Big and Increasing Share on Health
- 6.9 Non-Health Spending Per Person in Elderly Households Is Higher
Chapter 7: Who Produces Health Services?
- 7.1 Non-Profit Organizations or Public Owned Enterprises Provided Larger Share of Health Output
- 7.2 Government-Owned Firms Account for Low Share of Activity
- 7.3 Health Industry Has Produced Large and Growing Amount of Output
- 7.4 Health Services Output, 1929-2009
Chapter 8: Health Services and the Distribution of National Income
- 8.1 Share of Health-Related Supplement in National Income, 1948-2008
- 8.2 Wages and Salaries Account for Big and Growing Share of Income in Health Services
- 8.3 Share of Health-Related Income Accounted for by Proprietors' and Rental Has Fallen Steeply
- 8.4 Corporate Profits Have Reached Peak Share of Health Services Income
- 8.5 Pre-Tax Corp Profits in Health Sector Are the Least among Major Sectors in Private Businesses
- 8.6 Among Fortune 500, Health Services Companies Have Lower Profits
- 8.7 Pharmaceutical and Medical Devices Are among Highest-Profit Industries
Chapter 9: Productivity in the Health Sector
- 9.1 Recent Increase in Health Services Productivity
- 9.2 Health Productivity Has Grown Less among Private Businesses
- 9.3 Health Sector Has Better-Educated Workers among Industries
- 9.4 Information Capital Stock in Health Services, 1987-2007
- 9.5 R&D Has Contributed to Increase in Health Sector Productivity
- 9.6 Increase in Health Spending Explained 80% of Decline in Personal Savings
- 9.7 Increase in Total Input Has Outpaced Output in Many Parts of Health Sector
Chapter 10: The Labor Force and Employment in the Health Sector
- 10.1 Employment Has Increased Faster in Health Services than in the Rest of Economy
- 10.2 US Share of Health Sector in Employment Is High among Industrialized Countries
- 10.3 The Opportunity Cost of Health Sector Employment in US and Other G7 Counties
- 10.4 Share of Female Employees in Health Sector
- 10.5 Health Service Employees Work for Less Hours than Employees in General
- 10.6 Increased Longevity and Shorter Working Life Have Lengthened the Period of Retirement for Males
Chapter 11: Personal Incomes and Health Care
- 11.1 Rising Health Costs Hindered Growth in American Workers' Earnings
- 11.2 Employee Compensation in Health Services Is Slightly Higher than All Workers Average
- 11.3 Employee Compensation in Ambulatory Health Sector Grew Slowly
- 11.4 US Health Professionals Are Paid Higher than Other Industrialized Countries
- 11.5 Rise in US Rates of Return for Medical Education
Chapter 12: Distribution of Health Services
- 12.1 1% of Population Accounts for 25% of Health Spending
- 12.2 The Lowest-Income Families Have 2.5 Times Burden of Paying for Health Care Than That of the Highest-Income Families
- 12.3 Burden of Paying for Health Care Has Increased
- 12.4 Per Capita Health Spending Increases with Age
- 12.5 Difference between Men and Women's Health Costs Depends on Age
- 12.6 Regional Differences in Health Spending per Capita Have Narrowed then Widened
- 12.7 Regional Differences in Health Spending Burden Have Narrowed then Increased
Chapter 13: Poverty and Health
- 13.1 Millions Are Categorized as Poor because Medical Expenditures Are Not Taken into Account
- 13.2 Government Insurance Covers Half of the Poor
- 13.3 Lower-Income People Have Worse Health
- 13.4 Poor Children Are Much Less Likely to Have Private Health Coverage than General Population
- 13.5 Medicaid Covers Less than 1/3 of Poor Non-Elderly Adults
Chapter 14: The Structure of the Health Sector
- 14.1 Less than Half of US Health Workers Are Employed by Large Firms
- 14.2 Concentration in Health Insurance Industry
- 14.3 US Health Sector Is Highly Regulated
- 14.4 Unionization Rates in the Health Industry
Chapter 15: Health, Wealth, and Debt
- 15.1 Health Spending per Capita Has Grown Twice as Fast as per Capita Net Worth
- 15.2 Low-Income US Family May Incur Health Spending that Exceeds Their Net Worth
- 15.3 "Medical" Bankruptcies Account for 25-35% of US Bankruptcies
Chapter 16: Economic Fluctuations and Health
- 16.1 Aggregate Health Spending Growth and Business Cycle Fluctuations
- 16.2 Medicaid Spending Tends to Be More Countercyclincal among Components of NHE
- 16.3 Unemployment Rates for Male Workers in the Health Sector Are Lower than the Rest of the Economy
Chapter 17: Health Services and Quality of Life
- 17.1 Average American's Stock of Health Is Several Multiples of Lifetime Earnings
- 17.2 How Price of Treatments Changes over Time Depends on How Innovations Are Measured
- 17.3 Technology Has Been An Important Driver of Health Spending
- 17.4 Whether Social Burden of Illness Has Increased or Decreased Depends on How It was Measured
Chapter 18: U.S. Health Care in a Global Economy
- 18.1 US Leads the World in Medical Innovation
- 18.2 US Accounts for More than Half of World Pharmaceutical R&D Spending
- 18.3 US Accounts for a Relatively Small Share of Pharmaceutical Exports
Chapter 19: Do Americans Get Good Value for Money in Health Care?
- 19.1 US Health Spending Appears to Provide Good Value for the Money
- 19.2 Geographic Differences in Broad Health Outcomes Are Associated with Health Spending
- 19.3 Medicare Spending & Spending Growth Vary Substantially across Geographical Areas
- 19.4 US Health Spending per Capita Is Not Far from Expected
- 19.5 Increased US Health Spending Cannot Be Explained by Health Services Use
- 19.6 US Relies Heavily on Specialists in Contrast to Primary Care Doctors
- 19.7 Americans Pay Higher Prices for Brand-Name Drugs among Major Industrialized Countries
- 19.8 Medical Malpractice Explains Some Difference in Health Spending between US and Competitors
- 19.9 US Leads the World in Life Expectancy
- 19.10 US Ranks 3rd in the World in Saving Premature Infants' Lives
- 19.11 US Cancer Patients Have Better Chances of Survival among Industrialized Nations
- 19.12 US Has More Avoidable Deaths Amenable to Health Care among Industrialized Nations
- 19.13 Most "Avoidable" Deaths Are Related to Lifestyle or Behavior
- 19.14 US Has World's Highest Obesity Rate but a Low Smoking Rate among Industrialized Nations
- 19.15 The Challenge of Comparing US States
Chapter 20: Are Health Spending Trends Sustainable?
- 20.1 Projected Growth in Health-Related Benefits
- 20.2 Technology Has Been a Key Driver of Health Spending Growth
- 20.3 How Much Faster per Capita Health Spending Has Increased Relative to GDP Growth
- 20.4 Projected Real GDP per Capita Will Decline within 30 Years Due to Growth in Health Spending
- 20.5 90% of Annual GDP Growth Would Be Devoted to Health Care by 2085 if 1% Excess Cost Growth Persisted
- 20.6 Long-Term Unfunded Liabilities Associated with Health Entitlements Exceed $66 Trillion
- 20.7 Projected 75-Yr Increase in Mandatory Federal Health Spending Exceeds the Largest Source of Tax Revenue
- 20.8 US Will Face Challenge of an Increasing Number of Dependents per Working Adult
- 20.9 Projected Increase in US Government-Related Health Spending and Its Effect

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Chapter 17: Health Services and Quality of Life

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Inside Collection (Book): American Health Economy Illustrated

Book by: Christopher Conover. E-mail the author

17.2 How Price of Treatments Changes over Time Depends on How Innovations Are Measured

Module by: Christopher Conover. E-mail the author

Summary: In price measurement, the treatment of innovations or new products is perhaps the most difficult aspect of handling quality change.

For decades, medical prices have outstripped general inflation. Price trends vary by medical service, with prices for some services rising much faster than for others. When the BLS measures prices for other commodities, it is straightforward to measure how the price of a discrete item, such as an apple, changes over time.

This task is much more difficult in health care. The price of a hospital room, for example, does not include the much larger costs of actually occupying a bed. Moreover, even if the price could be precisely calculated, a hospital stay today is a dramatically different product than it was 50 or even 30 years ago. Unless the BLS can account for changes in technology and quality of care, the measured price of hospital care will give an exaggerated picture of how "pure" prices are rising over time.

Even if that task could be performed perfectly, such prices do not represent what is important: How much is the cost of treatment increasing? Even if we knew all the services needed for treatment, the answer depends on whether we assume that bundle of services is fixed over time or can be adjusted to account for actual changes in medical practice (figure 17.2a). Prescription drugs are another good example. Increases in the price of a particular drug are reasonably straightforward to measure. However, the average cost of the "blue pill" is not a good indicator of how much more patients have to pay for treatment for two major reasons. First, if a drug goes off-patent, generic competitors will appear with lower prices. Even for brand names for which there is not yet a generic substitute, there can be competitor drugs similar enough in function whose prices might be rising much more slowly. This could result in many patients switching to those alternatives if prices of the blue pill got too high.

The price of heart attack treatment increased from less than 10 percent to more than 35 percent, depending on how prices are measured.

When the price of treatment is taken into account, for example, the cost per day to treat depression or high cholesterol, rising drug prices (that is, the price of blue pills) can easily co-exist with falling costs for treatment (figure 17.2b). For social welfare, knowing how the price of various medical treatments is changing is a far better indicator than knowing how the price of individual components of a given treatment is changing. In a highly innovative medical system, new competing treatments appear all the time as do changes in the mix of resources required for a given treatment. Systematic price measurement of treatments is in its infancy.

After patent expiration, there has been a 51 percent reduction in the daily cost of therapy after 24 months.

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Berndt ER and M Aitken. A Different Perspective: The AARP Sponsored Schon- delmeyer-Purvis Studies. In Scaring Seniors: The AARP Drug-Price Reports. American Enterprise Institute. Washington DC. 2010.
Cutler DM, M McClellan, JP Newhouse and D Remler. Pricing Heart Attack Treatments. Medical Care Output and Productivity. National Bureau of Economic Research. http://www.nber.org/chapters/c7634.pdf (accessed August 9, 2010).

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Table of Contents

Chapter 1: Rise of a Massive Health Sector

Chapter 2: How Is Each Health Dollar Spent?

Chapter 3: Who Pays for Health Services?

Chapter 4: The Employer Rold in U.S. Health Care

Chapter 5: Government Health Expenditures, Taxes, and Deficits

Chapter 6: Health Services and the Family Budget

Chapter 7: Who Produces Health Services?

Chapter 8: Health Services and the Distribution of National Income

Chapter 9: Productivity in the Health Sector

Chapter 10: The Labor Force and Employment in the Health Sector

Chapter 11: Personal Incomes and Health Care

Chapter 12: Distribution of Health Services

Chapter 13: Poverty and Health

Chapter 14: The Structure of the Health Sector

Chapter 15: Health, Wealth, and Debt

Chapter 16: Economic Fluctuations and Health

Chapter 17: Health Services and Quality of Life

Chapter 18: U.S. Health Care in a Global Economy

Chapter 19: Do Americans Get Good Value for Money in Health Care?

Chapter 20: Are Health Spending Trends Sustainable?

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