Health care costs: A market-based view

If health care costs continue to rise at current rates, they could amount to 20 percent or more of the GDP of many developed countries. To understand how to manage—or influence—this expenditure, decision makers should look at the factors that influence the supply and demand of health care services.

* Throughout the world, leaders of government health agencies, heads of health care companies, and even patients—collectively, the shapers of the modern health care system—behold the growth of health care spending with alarm. For almost 50 years, spending has grown by 2 percentage points in excess of GDP growth across all Organisation for Economic Co-operation and Development (OECD) countries. As a result, health care has become a much bigger part of most of these economies.
* If current trends persist to 2050, most OECD countries will spend more than a fifth of GDP on health care. By 2080 Switzerland and the United States will devote more than half of GDP to it—and by 2100 most other OECD countries will reach this level of spending.
* Health care leaders fervently hope that the projections are off the mark. What will have to change to prevent health care from devouring half of a national economy?

This article contains the following exhibits:

* Exhibit 1: In the health-care market, the line between supply and demand is sometimes blurred.
* Exhibit 2: Per capita spending on health care strongly correlates with national GDP.
* Exhibit 3: The median increase in health-care spending in member countries of the Organisation for Economic Co-operation and Development (OECD) has been two percentage points above GDP for nearly 50 years.
* Exhibit 4: At the historic growth rate, health care will consume an ever-growing proportion of developed nations' wealth.
* Exhibit 5: In many countries, the tax-financed part of health care represents a massive transfer from young taxpayers to older health care users.

The McKinsey Quarterly