Cross-country comparison in health care price growth: 2000-2020 – Healthcare Economist

How have health care prices changed over the past two decades? That is the question of an article by Pap smears (2024) aims to answer, comparing US prices with those in Australia, Canada, France and the Netherlands between 2000 and 2020.

Before getting to the results, we must first determine what types of price indices exist. The authors cite three main types:

  1. Price indices for the entire economy: Examples include a GDP price index
  2. Price indices covering all goods and services consumed by households: Examples include the real individual consumption price index (AIC)
  3. National health deflators. These are health-specific price indices and are produced by a variety of government entities (for example, at the U.S. Centers for Medicare and Medicaid Services (CMS), the Bureau of Economic Analysis (BEA), and the Bureau of Labor Statistics (BLS), all of which produce national health deflators)

The authors argue that the economy-wide and AIC deflators fail to capture changes in health care prices.

Although widely used to deflate health expenditures for the purposes of international comparisons, the GDP and AIC price indices capture changes in prices in general, not changes in prices specific to health care. Since health care is often provided by non-market producers such as governments (where prices may be imperfect signals of market value), health care prices are likely to differ markedly from economy-wide prices or of AIC prices.

The data sources used by the authors are listed below:

Country Index name Producer
Australia Total Health Price Index (THPI) Australian Institute of Health and Welfare (AIHW)
Canada Health Care Total Implicit Price Index Statistics Canada
France Health Price Index Directorate of research, evaluation studies and statistics (DRESS)
The Netherlands Health Price Index Statistics of the Netherlands (Centraal Bureau voor de Statistiek, CBS)
US Personal Health Care Price Index Centers for Medicare and Medicaid Services (CMS)

Results:

The growth rate of healthcare spending was highest in Australia (5.7%) and the United States (4.9%) and lowest in France (2.7%). However, while a larger proportion of the spending growth was due to price increases in the US (55% of spending growth), this figure was much lower for other countries (48%). Further:

Looking at the relationship between the consumption-based health-specific index and the consumption-based general price index (AIC) over the study period, we find that the United States shows the highest relative cumulative “excess” growth in prices of health during the study period. study period (14%), followed by Canada (12%). Australia and the Netherlands also exhibit higher cumulative health price growth over the study period compared to overall price growth, although slightly lower (7%–6%) than the first group of countries. Finally, France shows the lowest cumulative price growth: health prices grow only slightly above general prices (2%).

In the figure below, spending growth is decomposed into prices and volume, where Panel A analyzes public payer consumption deflators and Panel B analyzes private payer consumption deflators. It can be clearly seen that price growth was faster for health care purchased by public payers compared to that purchased by households (i.e., out-of-pocket costs or private insurance).

The full document can be read. here.

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