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Insurance effects on US medical spending (1960-1993)

E A Peden1, M S Freeland

  • 1Office of Strategic Planning, Health Care Financing Administration, Baltimore, MD 21244, USA.

Health Economics
|January 16, 1999
PubMed
Summary

Increased insurance coverage significantly drove medical spending growth from 1960-1993. Medical technology advances, spurred by this coverage, were a major cost driver, alongside traditional factors like income and demographics.

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Area of Science:

  • Health Economics
  • Medical Technology Assessment
  • Healthcare Policy Analysis

Background:

  • Real per capita medical spending has shown consistent growth over recent decades.
  • Understanding the drivers of this spending is crucial for healthcare policy and resource allocation.

Purpose of the Study:

  • To quantify the contributions of insurance coverage and medical technology to historical medical spending growth.
  • To differentiate between commercial and non-commercial drivers of medical technology advancement.

Main Methods:

  • Econometric analysis using regression models.
  • Decomposition of medical spending growth into various contributing factors.
  • Examination of data from 1960-1993.

Main Results:

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  • Nearly half of 1960-1993 and two-thirds of 1983-1993 medical spending growth attributed to increased insurance coverage.
  • Approximately two-thirds of 1960-1993 spending growth linked to cost-increasing medical technology advances.
  • Standard factors like age-sex mix and income growth accounted for the remaining one-third of spending growth.

Conclusions:

  • Ever-increasing insurance coverage is a primary driver of medical spending growth.
  • Medical technology, influenced by insurance levels, significantly contributes to rising healthcare costs.
  • Policy interventions targeting insurance and technology development could impact future healthcare expenditures.