Measuring and Forecasting Global Health Expenditures

Section I of this chapter briefly reviews the literature on medical spending, which suggests that health expenditures began small but steadily increased throughout history (from 1 percent to 4 percent of GDP), then began to increase rapidly among wealthier developed countries after 1950. Section II examines temporal and spatial dimensions of measurement, which suggest that the evolution of global health expenditures may be best observed by tracking health expenditures as a share of GDP over decades. Nominal and real per capita amounts are subject to distortions created by lags and currency valuation. Months and years are too short a span, while persons, households and provinces are too small. Section III covers growth in the components of health expenditures (population, income, inflation, excess due to technology and other factors). A model of national health expenditure decisions over time is presented and used to explain empirical findings of varying distributed lag responses to macroeconomic growth and development. Section IV considers the methods and accuracy of national health expenditure forecasting. Section V addresses some problems of variable identification, with specific applications to population aging and the aggregate fiscal burden of care for the elderly. Section VI discusses the sustainability of current trends and the boundaries between long-term care, retirement and medical expenditures. It concludes by proposing that rising longevity and medical costs are best viewed as aspects of a process of economic and human development transforming the 20th and 21st centuries, rather than as isolated phenomena. The six sections each conclude with a discussion of policy implications, even the most technical sections regarding measurement, aggregation and lags, where the policy implications may not be immediately apparent. While nominal policies are publicly stated, it is often these “technical details” regarding boundary definition, timing and measurement that show how policy actually operates, that shape public opinion, and that drive future financial decisions