Understanding healthcare spending

In this note Nobel prize winner professor Fogel explains, among other interesting things, why in the United States the population is spending every year more on health. Basically, it is because health spending has an income elasticity higher than one, i.e., health spending grows more than income in proportional terms. In basic microeconomic terms, health is a luxury good. This phenomenon is also present in most of the countries of the continent. The following table shows our calculations of the income elasticity of health for 33 countries. This piece of research is part of our project to understand and forecast health spending in the Americas that will be published as a chapter in the forthcoming CISS 2010 Social Security Report.