by Andrew Foy, Christopher Sciamanna, Mark Kozak, Edward J. Filippone
Cato Institute
February 24, 2014
Cato Journal
Since 1970, annual growth in U.S. health care spending per capita has doubled the real growth in GDP per capita: 4.3 percent versus 2 percent. Over that same time period, countries in the Organization for Economic Cooperation and Development (OECD) averaged strikingly similar health care spending growth in relation to GDP per capita. Thus, despite pronounced institutional medical financing differences, any explanation accounting for the cost growth in health care must hold true across all OECD countries. In the medical care cost ratchet (MCCR) model, health care spending increases as new technologies are incorporated into traditional care standards that confer only modest clinical benefits. The current medical insurance model perpetuates the MCCR. Market-based approaches to health care reform would bend the cost curve over time by encouraging individuals to economize non-emergent health care decisions.

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