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. Website
Mortality rates in the US fell more rapidly during the late 19th and early 20th Centuries than any other period in American history. This decline coincided with an epidemiological transition and the disappearance of a mortality “penalty” associated with living in urban areas. There is little empirical evidence and much unresolved debate about what caused these improvements, however. This paper investigates the causal influence of clean water technologies – filtration and chlorination – on mortality in major cities during the early 20th Century. Plausibly exogenous variation in the timing and location of technology adoption is used to identify these effects, and the validity of this identifying assumption is examined in detail. We find that clean water was responsible for nearly half of the total mortality reduction in major cities, three-quarters of the infant mortality reduction, and nearly two-thirds of the child mortality reduction. Rough calculations suggest that the social rate of return to these technologies was greater than 23 to 1 with a cost per life-year saved by clean water of about $500 in 2003 dollars. Implications for developing countries are briefly considered.
"Cutler has paved the way for a unique new understanding of health care in America: policy makers and providers should focus on increasing the value of dollars spent rather than rehashing the tired distinction between cutting costs and paying more. For everyone interested in improving health care in the United States, this is original and inspiring – actually, indispensable." - Bill Bradley
“David Cutler’s Your Money or Your Life is a thoughtful analysis of the problems afflicting our health care system. His creative proposals will interest every citizen concerned about improving American health care.” - Edward M. Kennedy, U.S. Senator, Massachusetts
"This highly-readable volume explores all of the major issues that confront us as we attempt to improve America's health care system. David Cutler provides a clear and concise guide to how one should think about the costs and benefits of health care, the value of medical advances, and options for reforming the health care system. This is the book to buy if you want to understand how we can improve health care in America." - Robert D. Reischauer, President, The Urban Institute
“Cutler presents a refreshingly optimistic path for the future of America’s health care system – promoting policies focused on increasing the value of medical services and improving health outcomes. He finds over and over that while health care expenditures are significant, we get a great deal more in return. His work is a major contribution to what I believe will become an increasingly interesting and important debate – is more medical spending necessarily bad?” - Art Collins, Chairman and CEO, Medtronic, Inc.
David Cutler's Your Money or Your Life flatly refutes the proposition that good economics has to be a difficult slog through arcane tables, charts, and mathematics. In 123 absorbing pages he shows readers why the gains from improved health care vastly exceed its formidable costs and how the gains could be larger still. In so doing, he demonstrates that good economic analysis can contribute constructively to debate on public policy---and quote Euripides aptly at the same time!" - Henry J. Aaron, The Brookings Institution
"David Cutler's upbeat book delivers a welcome message to a public wearied by reports of medical errors, the rising number of uninsured, and the relentless growth in medical expenditures. . . . Anyone with a serious interest in the U.S. health care system - and its future - should read this engaging and provocative book by one of the most insightful health policy experts in the nation." - Alan Garber, Center for Health Policy, Stanford University
"Cutler's discussion of managed care and how doctors are reimbursed for certain procedures but discouraged from other practices is especially clear. Cutler's position-health insurance for all and doctor reimbursement by quality, not simply service-is clear and compelling." - Publishers Weekly, 11-3-03
"When economics and medicine mix there is bound to be confusion unless someone like Harvard economics professor Cutler, who seems to effortlessly make a complex issue comprehensible, is doing the mixing.... An elegant investigation." - Booklist, 12-15-03
"It's also important for readers to understand the cost effectiveness behind developments in treating such conditions as cardiovascular disease, infant mortality and mental illness; chapters devoted to these are the best material in Cutler's book. His case studies are well researched and offer a tremendous amount of information about medical history and its economic significance." - Los Angeles Times, 2-25-04