High and Rising Health Care Costs. Part 1: Seeking an Explanation

Abstract

The United States has the most expensive health care system in the world, with per capita health expenditures far above those of any other nation. For many years, U.S. health care expenditures have been growing above the overall rate of inflation in the economy. A few experts have argued that high and rising costs are not such a serious problem. Most observers disagree with this view, pointing to the negative impact of employee health care costs on employers, the government budgetary problems caused by rising health care expenditures, and an association between high health care costs and reduced access for individuals needing health services.

Several explanations have been offered for high and rising health care costs. These include the perspectives that high and rising costs are created by forces external to the health system, by the weakness of a competitive free market within the health system, by the rapid diffusion of new technologies, by excessive costs of administering the health system, by the absence of strong cost-containment measures, and by undue market power of health care providers.

This article, the first in a 4-part series, discusses 3 perspectives on health care: 1) Are high and rising health care costs a serious problem? 2) Are rising costs explained by factors outside the health care system? 3) Does the absence of a free market in health care explain why costs are high and rising? The remaining 3 articles in this series address other perspectives on health care costs.