What drives health care spending? Can we know whether population aging is a ‘red herring’?

What drives health care spending? Can we know whether population aging is a ‘red herring’?

Will continuing scientific advances boost overall health care spending?

Many studies argue that projections of health care spending should be based on the assumption that age-specific health care spending should be assumed to decline because of reductions in age-specific mortality rates. This paper contradicts that hypothesis, considering its suggestion unjustified. The paper believes that no one currently has any well-supported reason for predicting whether age-specific relative health care spending will rise, fall, or remain unchanged.

The paper believes that declining mortality in some measure reflects factors other than health care and in some measure reflects the results of increasing health care spending. Consequently, it underlines that this observation has practical significance for projections of U.S. health care spending.

The main findings of the paper are:

  • both age-specific relative health care spending and overall average growth of health care spending depend with considerable sensitivity on health care payment policies
  • yet, other-studies' projections are intended to reflect spending under current policy, which is likely to change
  • deciding how far into the future to project health care spending relates to Medicare actuaries to make projections of Medicare spending beyond 25 years
  • the best projection approach, until better evidence is available, would be to assume that average age-specific health care spending will rise at the historic average
  • it is not possible to predict reliably the impact of advancing technology on either average total health care spending or on age-specific relative spending
  • however, the vibrancy of biomedical science strongly suggests that this motive to higher spending will persist and could even strengthen
  • it is reasonable, therefore, to assume that continuing scientific advances will contribute in boosting overall health care spending
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