The Supply Side of Health Care

2019

Abstract

Total nominal US health care spending as measured in the National Health Expenditure Accounts (NHEA) reached nearly $3.5 trillion in 2017, or about 17.9 percent of GDP. This relationship is a demand side measure, relating health care expenditures in final demand to total final demand, which is equal to GDP. GDP is also measured as the sum of value added by industry. Other attempts to measure the health care share of value added have resulted in much lower shares than the demand side measure. In a 2014 paper, we traced the sectoral contributions to health care supply within an input-output (IO) framework, for the year 2012. In this paper we update and extend this analysis in current prices, from 1997-2017. We investigate the impacts of changes in industry structure, international trade and sectoral productivity on the relative contributions of industries to health care supply.

Resources

Working Paper - Supply Side Estimates to 2017 - August 22, 2019

Working Paper - Methodology: The Supply Side of Health Care in a Dynamic Context - August 22, 2019

2014

Abstract

There is a common assertion that health care is over one-sixth (or about 18 percent) of the economy.  This conclusion, however, is based only on a measure of health care demand.  It is much more difficult to identify a corresponding ratio in the supply side data of the economy, that is, in terms of value added and employment.

Our work reconciles information about the supply and demand sides of the national health sector.  We use input-output techniques to link the final demand values from the National Health Expenditure Accounts (NHEA) to domestic production and imports of commodities, industry value added, and industry employment.  We translate NHEA levels by spending categories (hospitals, physicians, drugs, devices, insurance, construction, investment, research, etc.) into equivalent National Income and Product (NIPA) final demand concepts and then translate these products and services expenditures into final demand by commodity.  We then use input-output accounting to determine, by sector, the total output, value added, and employment levels required to satisfy health care demand.  The value added and employment levels are identified not only for medical service sectors but also for medical manufacturing industries and for supporting sectors such as distribution, support services, and government production.  We find that in 2012, health care production required about 15.4 percent of total value added and 18.7 percent of civilian employment.  In addition, domestic health care demand required about 1.5 percent of GDP in imports.

Resources

Survey of Current Business Article - April 2014

Working Paper / Technical Appendix - April 15, 2014

This research was performed at Inforum at the University of Maryland. Questions may be directed to Douglas Meade, Executive Director of Inforum. More information about Inforum and author biographies are available on this site. A summary paper on this topic was prepared with support from the Office of the Actuary in the Centers for Medicare and Medicaid Services and published in the Survey of Current Business in April 2014.

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