Output and inflation components of medical care and other spending changes

From 1965 to 1990, spending on medical care rose from 5.9 to 12.2 percent of gross national product. This rise was the consequence of greatly expanded government and government subsidized private insurance coverage operating in an environment where payments for insured care by and large covered whatever costs were incurred. As a result, the personal consumption of medical care experienced both output and price average growth rates strikingly above economywide norms. Indeed, the output growth rate in this sector rivaled growth in several goods sectors with greatly expanded supplies. However, whereas goods in the latter sectors have become more accessible through lower relative prices, consumers with insufficient insurance coverage are being crowded out of the market for medical care by higher relative prices.