Abstract:

The increase in the health sector's share of the gross national product (GNP) in the U.S. from 5% in the 1940s to 11% in the 1980s is explained by increases in health prices relative to other prices (1.6%) & increases in the quantity of health services relative to increases in other goods & services (0.9%). Factors involved in increases in both areas include wages (income of physicians & other health professions), productivity (as measure of services independent of effectiveness), technology (innovation in products, processes, & management of health care systems) & insurance (public & private). Also, health care is characterized by widespread third-party payment, which removes it from market constraints that determine spending. This rise in health care cost is expected to continue, especially considering the increased health care needs of an aging population.