If health is a luxury good, why should we expect the health spending trajectory to change?
The chart shows that on a log-log scale, the relationship between per capita national health expenditures and per capita GDP is ram-rod straight and has been since 1935.* Based on several statistical tests, Woodward and Wang conclude that there are
no significant changes in either the intercept or the slope for the years of any of the major reforms of the period, including the introduction of Medicare and Medicaid in 1966, in the years following Nixon’s Wage and Price Controls and the health planning legislation of the early 1970s, in the years following Medicare’s introduction of the Prospective Payment System in 1984, or after the widespread adoption of managed care in the 1990s.
With such overwhelming evidence from our past that, despite our efforts, this national health spending curve has not bent, why do we think the future will be much different?
