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Fact or fiction? Health spending inevitably up

Claim: America will keep spending an increasing share of its income on health care.

In 1940, health care spending amounted to 4 percent of national income. By 1970, health spending had risen to 7.3 percent of national income and by 1990, it had jumped to 12.3 percent. Today, the United States spends more than 17 percent of its national income on health care. Stanford University economist Victor Fuchs points out that over the past 30 years, health expenditures have grown every year at a pace 2.8 percent faster, on average, than the rest of the economy. Fuchs sees multiple causes for this, including "overutilization of care" because "unnecessary or marginally useful tests, prescriptions, operations, and visits generate income" for doctors, hospitals, and clinics. But he adds that advances in medicine and technology -- echocardiograms, kidney dialysis, magnetic resonance imaging, etc. -- are the fundamental reason why health spending has grown so much faster than the rest of the economy. Will this inevitably continue?

Fact or fiction?
Unclear. Nobel Prize winning economist Robert Fogel said that health spending is demand-driven. Americans spend more of their income on medical care as they need to spend less of it on other necessities. "Between 1875 and 1995, the share of family income spent on food, clothing, and shelter declined from 87 percent to just 30 percent, despite the fact that we eat more food, own more clothes, and have better and larger homes today than we had in 1875," Fogel notes. Health costs may keep rising as average U.S. life span grows. But there’s precedent for spending on a specific sector of the economy to decline: Defense spending dropped from nearly 15 percent of national income in 1953 to 10 percent in 1960, declined during the 1970s, and bottomed out at 3.2 percent in 2000, before increasing to 4.5 percent in 2008.

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