Health Care Expenditures Reexamined

Concern about health care expenditures is not a new phenomenon. Seventy-five years ago, President Herbert Hoover appointed a committee to investigate the cost of medical care under the chairmanship of Ray Lyman Wilbur, MD, president of Stanford University (1). Thirty-eight years ago, John Gardner, Secretary of Health, Education, and Welfare, convened a national conference on medical care costs (2). Since then, not a year has passed without professional and lay periodicals addressing this subject. Most recently, Annals has published 4 articles by Thomas Bodenheimer on health care costs, the last of which, coauthored by Alicia Fernandez, appears in this issue (3-6). These articles provide valuable background material and address several key questions about expenditures from many different perspectives. Possible approaches to cost containment are discussed, with special emphasis on the potential role of physicians and with the caveat that this is “an overview of a complex topic, written by a noneconomist for noneconomists” (3).

This editorial, written by an economist for physicians, emphasizes some critical distinctions and offers a somewhat different set of questions and answers. It differentiates sharply between levels of expenditures and their rates of growth, addresses the question of why either should be of concern for public policy, and discusses strategies for containing expenditures.

It is important to distinguish between high levels of expenditures and high rates of growth because the symptoms, diagnoses, and appropriate interventions all differ markedly. The level of health expenditures in the United States is very high relative to other countries: In 2001, the United States spent $4887 per person, almost 50% more than the next highest-spending country, Switzerland. The median level of spending for the 30 countries belonging to the Organisation for Economic Cooperation and Development (OECD) was only $2161 (7). By contrast, the rate of growth …