Does Health Spending Have to Grow?

In a new article, “The Health Financing Transition," Bill Savedoff and Victoria Fan provide a conceptual framework and empirical evidence regarding two long term trends in health spending – the growth of total health expenditure per person and a decline in the share of out-of-pocket health spending. They show that demand for health care services made possible by rising national income is the primary driver of spending growth but that public policy is the main driver of reductions in the out-of-pocket share. Seeing these trends in a long historical perspective makes it possible to focus health reform debates on what really matters – finding ways to pool health resources and raise the productivity of health care services.