A World of Rising Health Care Costs

Americans are used to hearing that health care will bust the budget. The Congressional Budget Office projected last year that Medicare, Medicaid and other government health programs would eat up 9.6 percent to 10.4 percent of the nation’s gross domestic product by 2037, crowding out many other vital programs.

But a new report from the Organization for Economic Cooperation and Development suggests that the United States is not the only country that will struggle to contain public spending on medical care. In fact, costs are likely to increase slightly less in the United States than in other industrialized countries and some big developing countries around the world.

Public spending on medical services has slowed much more sharply in other countrie since the financial crisis hit government budgets around the industrial world. Government health expenditures across the O.E.C.D. grew only 0.1 percent in both 2010 and 2011, on average, after growing 4.9 percent a year between 2000 and 2009. In Greece they plummeted more than a quarter over those two years. In Britain they contracted by 2 percent. In the United States, by contrast, government health spending grew 3.3 percent in 2010 and 2.2 percent in 2011.

Source: Organization for Economic Cooperation and Development Health Data 2013

But health spending is expected to pick up as the economy recovers. The organization lays out two! possible paths. In one, health care costs keep rising at the pace of the last decade or so - powered not only by growing incomes and the aging of the population but also by rapid medical inflation, technology advances and more intensive delivery.

Source: Organization for Economic Cooperation and Development

Along the other, unspecified policy changes - perhaps like the Affordable Care Act â€" manage to slow spending to what would be justified by aging and income only.

Source: Organization for Economic Cooperation and Development

If it is not contained, government spending on health will rise to almost 12 percent of G.D.P. on average across the 34 O.E.C.D. nations, from 5.5 percent in the second half of the last decade. In the United States it will rise to 13.2 percent from 7.1 percent.

And in some poor developing countries, it will rise even faster. In China, for instance, health spending would rise to 8.3 percent of G.D.P. in 2060 from 1.9 percent in the second half of the 2000s.

Budgets will be easier to meet if health spending is tamed. Under the assumption that this happens, the O.E.C.D.’s public budget for health care eats up only some 8 percent of the economy by 2060. In the United States it takes up 9.3 percent.

But nothing, it seems, will stop public spending on health care from rising.