The rise in medical expenditures and long-run macroeconomic outcomes
Kelly, Mark Christopher
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In recent decades medical expenditure growth in the US has significantly outpaced output growth, threatening to crowd out investment, consumption, and discretionary government expenditures. Recent health care reforms, such as the Affordable Care Act, were instituted in part to curtail the growth of medical expenditures. However, the long-run economic ramifications of this sort of cost containment health care reform is still up for debate. This thesis is laid out as follows: In Chapter 2, I utilize a novel general equilibrium model with health capital accumulation and health insurance to analyze the long-run macroeconomic consequences of one-time shocks to the economy that are related to the growth in health care expenditures. Then, in Chapter 3, I develop a continuous time overlapping generations model with exogenous mortality to test the macroeconomic implications of various health care and fiscal policy reforms. This model is extended in Chapter 4 to allow for endogenous mortality. The analysis contained in Chapters 2-4 emphasizes the importance of accounting for changes to productivity and economic growth when evaluating the aggregate consequences of a particular health care reform.