Health Care Spending and GDP in One Chart

There has been a great deal of discussion about the recent decreases in the rate of growth of health expenditures, and there has been a tendency to attribute it to the early effects of health care reform. In fact, while such effects may lie in the future, the major reason that health care spending growth has slowed is that economic growth has decreased. This relationship is most apparent when health care spending today is compared with GDP several years ago. The reason for this lagged relationship has been described by Getzen and others. It relates to the expansion of health benefits, services, employment, etc. when business profits are up and tax revenues are strong and the reverse when economic reversals occur, always with a lag between changes in the macroeconomy and the ripple effect on health care spending. The illustration below tells the tale. There must certainly be other reasons for fluctuations in health care spending, but most is explained by preceding fluctuations in economic growth.

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