National Health Expenditure Growth in the 1980's: An Aging Population, New Technologies, and Increasing Competition

Health care spending in the United States more than tripled between 1971 and 1981, increasing from $83 billion to $287 billion. This growth in health sector spending substantially outpaced overall growth in the economy, averaging 13.2 percent per year compared to 10.5 percent for the gross national product (GNP). By 1981, one out of every ten dollars of GNP was spent on health care, compared to one out of every thirteen dollars of GNP in 1971. If current trends continue and if present health care financing arrangements remain basically unchanged, national health expenditures are projected to reach approximately $756 billion in 1990 and consume roughly 12 percent of GNP. The focal issue in health care today is cost and cost increases. The outlook for the 1980's is for continued rapid growth but at a diminished rate. The primary force behind this moderating growth is projected lower inflation. However, real growth rates are also expected to moderate slightly. The chief factors influencing the growth of health expenditures in the eighties are expected to be aging of the population, new medical technologies, increasing competition, restrained public funding, growth in real income, increased health manpower, and a deceleration in economy-wide inflation. Managers, policy makers and providers in the health sector, as in all sectors, must include in today's decisions probable future trends. Inflation, economic shocks, and unanticipated outcomes of policies over the last decade have intensified the need for periodic assessments of individual industries and their relationship to the macro economy. This article provides such an assessment for the health care industry. Baseline current-law projections of national health expenditures are made to 1990.