Health Care Spending: Historical Trends and New Directions

Over the last five decades, broad changes in the US health care system have dramatically influenced growth in health care expenditures. These structural changes have also influenced the trajectory of the health economics research. This paper reviews some of the seminal health economics papers (measured by citations) and identifies the salient factors driving the growth of medical expenditures. We find that the research identified – and was strongly influenced by – four eras of expenditure growth: (1) coverage expansion; (2) experimentation with financial incentives; (3) the managed care backlash; and (4) a golden era of declining expenditure growth. We conclude by discussing some themes from this research suggesting optimism that, going forward, we can curb excess expenditure growth above GDP growth without harming population health.