U.S. Health Care Spending: Myths, Facts, and Strategies

Published February 20, 2024

Course Mentioned in this Post: Health Care Economics, Health Care Strategy

What factors contribute to the rising costs of health care in the United States? What role do government policies and regulations play in shaping healthcare spending trends? How do changes in healthcare delivery models and payment structures affect overall healthcare spending?

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Harvard professors Leemore Dafny and Michael Chernew gathered with moderator and MD/Phd Candidate Maximilian Pany to answer these questions and more in our latest webinar, U.S. Health Care Spending: Myths, Facts, and Strategies.

In this 45-minute webinar, professors Dafny and Chernew outlined the current state of health care spending in the United States, addressed the myths and realities of what drives spending, and discussed some strategies for controlling spending in the private and public sectors. Additionally, the panelists answered participant questions and offered information on how health care spending impacts the industry on all levels.

Dafny dove into the conversation stating, “There are a few different drivers of this [spending] growth, including our very high administrative costs in the U.S. We also use a lot of expensive technology, but a very important source, especially in recent years, has been growth in prices for our health care providers.”

Chernew outlined the state and outlook of publicly funded health care spending and shared, “In 2021 Medicare was spending about 850 billion dollars. That's about a quarter of our national health expenditures and about 4% of GDP. What’s alarming is that research is projecting Medicare spending to double once we get past 2030. It's that forward-looking vision that has people very concerned.”

The panelists each addressed common myths, including the idea that preventative care helps keep health care spending low. “Most wellness and prevention programs have not shown that they would save money because they are much more complicated than simply making everybody healthier; however, that doesn’t mean that we shouldn’t have wellness and prevention programs,” said Chernew.

The panelists also presented some possible strategies for managing spending in the United States. Professor Dafny proposed that, “the private sector should take a page from the public sector and implement some price regulations.” Professor Chernew noted that the key to any strategy for managing spending “is to change payment models, to encourage efficiency, and to give people incentives to practice care efficiently.”

For more discussion about the state of health care spending in the U.S., view the full webinar:
 

For more discussion about the state of health care spending in the U.S., view the full webinar:

Leemore Dafny is the Bruce V. Rauner Professor of Business Administration and the Mary Ellen Jay and Jeffrey Jay Fellow at the Harvard Business School, and Professor of Public Policy at the Harvard Kennedy School. Dr. Dafny is an applied microeconomist whose research examines competition in healthcare markets, with an emphasis on policy implications. She has been a deputy director at the Federal Trade Commission and writes frequently on antitrust-related topics.

Michael Chernew is the Leonard D. Schaeffer Professor of Health Care Policy at Harvard Medical School. Dr. Chernew’s research examines several areas related to improving the health care system, including studies of novel benefit designs, Medicare Advantage, alternative payment models, low-value care, and the causes and consequences of rising health care spending. Dr. Chernew is currently serving as Chair of the Medicare Payment Advisory Commission (MedPAC), where he previously served as the Vice Chair and as a Member.

Maximilian Pany is an MD-PhD candidate at Harvard. His research focuses on the economics of health care delivery.

To continue learning about economics and business strategy in health care with Professors Chernew and Dafny, apply for their courses including Health Care Economics and Health Care Strategy.