Events and Seminars : 2012 Seminars

A Cross Country Analysis of Health Care Expenditures Understanding the US Gap

Manuel S. Santos
Professor and Chair, Department of Economics,
School of Business, University of Miami

October 8th, 2012

In this paper we analyze the evolution of the US health care expenditures over total consumption; as is well known, this share has been trending upwards in the last 40 years. We consider a representative sample of OECD countries, and lay out a growth accounting exercise that decomposes the effects of relative health care prices, income, regulations, and technology. Our quantitative analysis demonstrates that relative prices and health care reforms can trace down the differential increase in US health care expenditures over various time sub-samples. There is ample international evidence to support relatively higher health care prices in the US. Some other explanatory variables —- life expectancy, physicians’ compensation, and trends in aging population —- would seem unable to explain the evolution of US health care expenditures over our sample of OECD countries and time periods.