The Supply Side of Health Care

Abstract

There is a common assertion that health care is over one-sixth (or about 18 percent) of the economy.  This conclusion, however, is based only on a measure of health care demand.  It is much more difficult to identify a corresponding ratio in the supply side data of the economy, that is, in terms of value added and employment.

Our work reconciles information about the supply and demand sides of the national health sector.  We use input-output techniques to link the final demand values from the National Health Expenditure Accounts (NHEA) to domestic production and imports of commodities, industry value added, and industry employment.  We translate NHEA levels by spending categories (hospitals, physicians, drugs, devices, insurance, construction, investment, research, etc.) into equivalent National Income and Product (NIPA) final demand concepts and then translate these products and services expenditures into final demand by commodity.  We then use input-output accounting to determine, by sector, the total output, value added, and employment levels required to satisfy health care demand.  The value added and employment levels are identified not only for medical service sectors but also for medical manufacturing industries and for supporting sectors such as distribution, support services, and government production.  We find that in 2012, health care production required about 15.4 percent of total value added and 18.7 percent of civilian employment.  In addition, domestic health care demand required about 1.5 percent of GDP in imports.

Resources

Survey of Current Business Article - April 2014

Working Paper / Technical Appendix - April 15, 2014

This research was performed at Inforum at the University of Maryland. Questions may be directed to Jeffrey Werling, Executive Director of Inforum. More information about Inforum and author biographies are available on this site. A summary paper on this topic was prepared with support from the Office of the Actuary in the Centers for Medicare and Medicaid Services and published in the Survey of Current Business in April 2014.

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