The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.
- BLS Handbook of Methods
- Bureau of Economic Analysis
- Bureau of Labor Statistics
- Congressional Budget Office
- Economic Data - FRED® II, St. Louis Fed
- Office of Management and Budget
- Statistics: Releases and Historical Data, Board of Governors
- U.S. Census Bureau Economic Programs
- White House Economic Statistics Briefing Room
January 22, 2006
We Are Richer, Therefore We Spend (On Health Care)
Angry Bear apparently never sleeps, and to prove it Kash Mansori has an interesting post on medical care spending (posted at 4:15 AM Saturday morning!). A few highlights:
It should come as no surprise to anyone that, partly as a result of a persistently higher-than-average rate of inflation in medical care, consumers have been spending a larger and larger fraction of their income on medical care...
... [Bureau of Economic Analysis] data attributes much of this increase in health care's budget share to an increase in real medical care spending, not to inflation. In other words, the rapid advances in health care spending during the 2000s are largely due to the fact that individuals are consuming more health care, according to the BEA...
A few weeks ago I suggested that higher spending may be associated with declines in the effective cost of medical care, by which I mean costs inclusive of factors such as pain, probability of complications, and recovery time. Implicitly I was suggesting that we overestimate the price of medical services, a possibility Kash notes in his post.
Economists Charles Jones and Robert Hall have another explanation: Rising shares of expenditure on medical care is the natural outcome of becoming ever wealthier. From their abstract:
Health care extends life. Over the past half century, Americans spent a rising share of total economic resources on health and enjoyed substantially longer lives as a result. Debate on health policy often focuses on limiting the growth of health spending. We investigate an issue central to this debate: Is the growth of health spending the rational response to changing economic conditions---notably the growth of income per person? We develop a model based on standard economic assumptions and argue that this is indeed the case. Standard preferences---of the kind used widely in economics to study consumption, asset pricing, and labor supply---imply that health spending is a superior good with an income elasticity well above one.... In projections based on the quantitative analysis of our model, the optimal health share of spending seems likely to exceed 30 percent by the middle of the century.
Kash has it just right when he says
... what is underlying dramatic change in medical care spending of the past few years. .. [is clearly] an important question, because it plays a crucial role in understanding whether the rapid rise in people's spending on health care in recent years is a good thing or bad.
As of now, I'm in the good thing camp.
TrackBack URL for this entry:
Listed below are links to blogs that reference We Are Richer, Therefore We Spend (On Health Care) :
- When Health Insurance and Its Financial Cushion Disappear
- What Is the "Right" Policy Rate?
- Is Poor Health Hindering Economic Growth?
- Behind the Increase in Prime-Age Labor Force Participation
- An Update on Labor Force Participation
- Another Look at the Wage Growth Tracker's Cyclicality
- GDPNow's Second Quarter Forecast: Is It Too High?
- Are Small Loans Hard to Find? Evidence from the Federal Reserve Banks' Small Business Survey
- Slide into the Economic Driver's Seat with the Labor Market Sliders
- The Fed’s Inflation Goal: What Does the Public Know?
- September 2017
- August 2017
- July 2017
- May 2017
- April 2017
- March 2017
- February 2017
- January 2017
- December 2016
- November 2016
- Business Cycles
- Business Inflation Expectations
- Capital and Investment
- Capital Markets
- Data Releases
- Economic conditions
- Economic Growth and Development
- Exchange Rates and the Dollar
- Fed Funds Futures
- Federal Debt and Deficits
- Federal Reserve and Monetary Policy
- Financial System
- Fiscal Policy
- Health Care
- Inflation Expectations
- Interest Rates
- Labor Markets
- Latin America/South America
- Monetary Policy
- Money Markets
- Real Estate
- Saving, Capital, and Investment
- Small Business
- Social Security
- This, That, and the Other
- Trade Deficit
- Wage Growth