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May 12, 2010

Health Care Is Different—That's Why Expenditures Matter

Author Affiliations

Author Affiliation: National Bureau of Economic Research, Stanford, California.

JAMA. 2010;303(18):1859-1860. doi:10.1001/jama.2010.593

Health care expenditures in the United States have been increasing much more rapidly than the rest of the economy over the past 30 years. The average gap, 2.8% per annum, results in health care's share of the economy doubling every 26 years.1 Why does this matter? Would it matter if expenditures for personal computers were increasing 2.8% per annum more rapidly than the rest of the economy? The appropriate response would be, “So what?” Concern about health care expenditures is often attributed to the large role of these expenditures in the federal budget and the effect on the deficit.2 But that is not the whole story. A dollar spent on health care is not a priori more fiscally toxic than a dollar spent on transportation or education or any other item in the government budget. Moreover, health expenditures in the private sector have also been increasing rapidly. What matters most are the characteristics that distinguish health care from other goods and services: great uncertainty about an individual's need for care, the essential nature of some care, and the ambiguous role of competition. These characteristics help explain the distinctive institutional features of health care and their consequences.

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