Modeling the Dynamics of the U.S. Healthcare Expenditure Using a Hyperbolastic Function

In this paper, we investigate the dynamics of the U.S. national healthcare expenditures from 1960 to 2011. The data were obtained from the U.S. Department of Health and Human Services, Center for Medicare and Medicaid Services. The analytical method allows extracting the long-run deterministic trend from the cyclical and the random components. The long-run trend is estimated using six classical growth models and three more recent growth curves called Hyperbolastic growth models of types I, II, and III, denoted by H1, H2, and H3, respectively. The statistical results indicate that the H1 model provides the best fit of the data. The study is complemented by a mathematical analysis of the deterministic long-run component of the national healthcare expenditure (NHE) as modeled by H1. This analysis is performed by examining the behavior of the absolute growth rate (pace of increase curve), the relative growth rate, and the acceleration of the U.S. NHE over the 52-year time frame. To the best of our knowledge, this paper provides the first application of Hyperbolastic models to economics data. This study can be used by researchers and policy makers as a descriptive as well as a predictive tool.