How health-care costs stopped rising

F or a long time, health care was eating the world. From 1950 to 2009 American spending on hospitals, medics and the like rose from 5% of gdp to 17%. Between the late 1970s and the mid-2010s British public spending on health rose by 4% a year in real terms, much faster than the economy’s growth of 2% a year. From 1980 to 2010 overall French prices rose by 150%; the price of caring for a sick or old person rose by 250%. Among economists, the proposition “health care’s share of gdp rises” was almost as close to an iron law as “free trade is good” or “rent controls do not work”. The iron has now melted. Even as populations age, and as the world continues to deal with the fallout from the covid-19 pandemic, health care is no longer taking over the economy. Across the rich world health care’s share of gdp jumped in 2020 and 2021, because of a combination of pandemic-related spending and lower gdp. However, it has since fallen back to close to its level in 2008 (see chart 1). Because of this

F or a long time, health care was eating the world. From 1950 to 2009 American spending on hospitals, medics and the like rose from 5% of gdp to 17%. Between the late 1970s and the mid-2010s British public spending on health rose by 4% a year in real terms, much faster than the economy’s growth of 2% a year. From 1980 to 2010 overall French prices rose by 150%; the price of caring for a sick or old person rose by 250%. Among economists, the proposition “health care’s share of gdp rises” was almost as close to an iron law as “free trade is good” or “rent controls do not work”. The iron has now