Health Care Prices, the Federal Budget, and Economic Growth

Rising health care spending, led by rising prices, has had an enormous impact on the economy, especially on the federal budget. Our work shows that if rapid growth in health care prices continues, under current institutional arrangements, real economic growth and employment will be lower during the next two decades than if health price inflation were somehow reduced. How big the losses are and which sectors bear the brunt of the costs vary depending on how society chooses to fund the federal budget deficit that stems from the rising cost of federal health care programs.