As populations age and medical spending rises, there is no doubt that the medical system will account for an increasing part of economic activity. But how much more, and which countries will be most affected? Those are the questions I address in this paper. To answer them, I develop a model to forecast medical spending in OECD countries. The results yield several important conclusions, ranging from 2 to 4 percent of GDP in the next half century. Expected technological innovation in medicine raises the projected increase in the next 30 years to as high as 9 percent of GDP. Overall, the US and Japan will be among the most affected countries, with the UK being least affected. In Japan, the primary issue is demographic change, while medical cost increases are more important in the US.
Cutler, David M, Edward L Glaeser, and Jacob Vigdor. 2005. “Ghettos and the Transmission of Ethnic Capital.” Ethnicity, Social Mobility, and Public Policy Comparing the USA and UK, edited by Glenn C Loury, Tariq Modood, and Steven M Teles, 204-221. Cambridge: Cambridge University Press, 204-221. Website