We are spending an increasing amount of our budget on health care. Private as well as public health expenses are growing spectacularly: 5% on average every year over the past 25 years! What’s to blame? In fact, the main suspects are our own preferences: the richer we get the more we are willing to spend on healthcare. This NBER paper found an income elasticity for health services of 1.6, meaning that income expenditures on health care in the U.S. are likely to reach 29 percent of the GDP by 2040! This confirms earlier findings of the Belgian Plan Bureau. Welcome to the health economy!
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