A well-functioning health-care sector supports well-being and is a prerequisite for a well-functioning economy. Unfortunately, the problems with U.S. health care—from high prices to excessive administrative costs to insufficient competition—are substantial. These 12 facts about the economics of U.S. health care provide context for important policy discussions.
The United States spends a larger share of its GDP on health care than any other advanced economy. This high private sector health-care spending in the United States is driven mostly by higher prices, with little evidence to suggest that high prices reflect better quality of care. In this proposal, Michael Chernew, Leemore Dafny, and Maximilian Pany discuss how price regulations could be used to constrain commercial provider prices in an efficient manner.
U.S. health-care spending on administrative costs far exceeds the amount necessary to deliver effective health care. David Cutler proposes several reforms to reduce administrative health-care costs and improve satisfaction for both patients and providers.
Martin Gaynor of Carnegie Mellon University describes the substantial consolidation that has occurred in health-care markets, showing that it is has generally resulted in higher prices without gains in quality or other improvements. Gaynor proposes three types of policy reforms that would increase competition in health care and improve market functioning.
Slowdowns in the economy are inevitable. While it may be tempting to rely on Federal Reserve policy as a lone response to recessions, this would be a mistake; we know that fiscal stimulus is effective. Rather than wait for a crisis to strike before designing discretionary fiscal policy, we would be better served by preparing in advance. Enacting evidence-based automatic stabilizer proposals before the next recession will help the next recovery start faster, make job creation stronger, and restore confidence to businesses and households.
Development economics research has made substantial progress in addressing poverty, poor health and education, and other problems of struggling areas. In this paper, Stephen C. Smith relates findings from the development economics literature to U.S. policy problems, highlighting programs and policies that have the potential to assist lagging areas in the United States.