🚑 The Supply Side of U.S. Health Care in a Dynamic Context // Douglas Meade

Douglas Meade — Inforum, University of Maryland

Summary: 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 previous 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.

For reference: D. Meade. Health Care in the U.S. The Supply Side. 3 September 2019. Russia, Sochi, 27th Inforum Conference, URL: https:// ecfor.ru/publication/health-care-in-the-us-the-supply-side/

Link: https://ecfor.ru/publication/health-care-in-the-us-the-supply-side/

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This presentation happened 3 September 2019, Russia, Sochi at 27th Inforum Conference.

The conference & materials: https://ecfor.ru/27th-inforum-world-conference/

Playlist with the other videos from the conference: https://www.youtube.com/playlist?list=PLJBJFs8UgQgpmWWFzqw87jdwOBQXQmLfu
Inforum’s site: http://www.inforum.umd.edu/

Inforum, or Interindustry Forecasting at the University of Maryland, was founded nearly 50 years ago by Dr. Clopper Almon, now Professor Emeritus of the University. It is dedicated to improving business planning, government policy analysis, and the general understanding of the economic environment.

The host side was the Institute of Economic Forecasting of the Russian Academy of Sciences. IEF RAS specializes in fundamental, applied and exploratory scientific research in the field of analysis and forecasting of the socio-economic prospects of Russia and its regions, and the development of recommendations and proposals with a goal to improve the quality of economic policy in Russia. The site is https://ecfor.ru.

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Notes:

Contents:

• Overview
• Review of National Health Accounts (NHE)
• US Health Care Spending
• Motivation for This Study
• Calculation of the Supply Side Requirements of Health Care
• Review of Results
• Implications and Future Directions

The Supply Side of Health Care

Health care spending is a large component of US GDP (17.9% in 2017).

• Demand: Reported in detail and studied extensively.
• Supply: Only major health care industries are widely recognized and studied (6.3% of GDP as measured by VA in 2017).•
• Difference includes: Direct supply of pharmaceuticals, machinery, retail and other services.
• Indirect supply chain, and trade and transportation margins. Input-Output techniques identify the indirect supply to health care.

Future Directions

Better understand shifts in health-related value added and employment between sectors. This may be factored as follows:

• Changes in labor productivity and value added/output ratios.
• Changes in the import share.
• Changes in the structure of interindustry purchases.
• Build health care supply side accounting in constant prices. Determine how the components of supply affect health care prices.
• Short-run (10 year) projections: Labor force (and occupational) demands given projections?
• Long-run projections (beyond 2028): Implications of projected health care spending on economy-wide potential growth.

The Inforum LIFT Model

LIFT is an interindustry macroeconomic model of the U.S., with IO demand and price relationships at its core, but also a dynamic aggregative model.
Econometric equations are included for all vectors of final demand, value added, employment, and hours. There are 121 commodities and 71 industries in the model.

The model structure is useful for understanding how changes in import prices affect average prices paid in the U.S. and imports by commodity.
Price changes affect consumers, but also industries that purchase imported good for intermediate consumption.

Benefits and costs can be expected to be different for each industry.