Download this Paper Open PDF in Browser

Growth in Health Consumption and Its Implications for Financing OASDI: An International Perspective

Boston College Center for Retirement Research Working Paper No. 2012-21

39 Pages Posted: 19 Sep 2012  

Barry Bosworth

Brookings Institution - Economic Studies Program

Gary Burtless

Brookings Institution; Boston College - Retirement Research Center

Date Written: September 1, 2012

Abstract

The rising cost of U.S. health care has reduced the share of compensation that is taxable by Social Security. Between 1960 and 2010, non-taxable employer premiums for worker health plans increased from 1 percent of employee compensation to 7 percent. We use international data to examine the determinants of trends in health care spending and the reasons that the U.S. experience has differed from that of other high-income countries. In 2010, the share of U.S. gross domestic product devoted to health care was 7.2 percentage points higher than the share in other rich countries. We document the growth of this gap in the past five decades. Much of it developed between 1980 and the mid-1990s, though we also find another episode of outsized growth in the early 2000s. We identify six countries, including most of Scandinavia, which have seen a slowdown in health spending growth. These were also countries that had higher-than expected health spending, given their average incomes, in the 1960s and 1970s. The slowdown in health expenditure growth may simply reflect a reversion of their spending toward the OECD mean. We find no mean reversion in U.S. health spending growth. Our review of other literature suggests that the current excess in U.S. health costs is mainly traceable to higher prices for health care goods and services. Compared with other OECD countries, the United States has been slow to develop institutions or global budget constraints that restrain the pace of growth in health costs.

Suggested Citation

Bosworth, Barry and Burtless, Gary, Growth in Health Consumption and Its Implications for Financing OASDI: An International Perspective (September 1, 2012). Boston College Center for Retirement Research Working Paper No. 2012-21. Available at SSRN: https://ssrn.com/abstract=2149134 or http://dx.doi.org/10.2139/ssrn.2149134

Barry Bosworth (Contact Author)

Brookings Institution - Economic Studies Program ( email )

1775 Massachusetts Avenue, NW
Washington, DC 20036
United States
202-797-6000 (Phone)
202-797-6181 (Fax)

Gary T Burtless

Brookings Institution ( email )

1775 Massachusetts Ave. NW
Economic Studies Program
Washington, DC 20036-2188
United States
202-797-6000 (Phone)
202-797-6181 (Fax)

Boston College - Retirement Research Center ( email )

Fulton Hall 550
Chestnut Hill, MA 02467
United States

Paper statistics

Downloads
27
Abstract Views
555