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Technological Advances In Health Care

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Health care expenditure has been on the rise for several years across several countries around the world. Between now and 2050, the OECD predicted that for average nations, public expenditure on health care and long-term care could double as a share of GDP in the absence of new policy to address past trends in this sector, rising from the current average level of 6-7 % of GDP to around 10% (OECD 2006). That estimate includes the consideration that as people live longer, they also remain in good health for longer. Even including cost containment measures, results have shown that public spending on health care could see large increases, and in less wealthy countries, those increases could be dramatic. The dynamic of these changes has been characterized …show more content…
Newhouse would also go on to mention that a great deal residual increase in health care costs comes from what he describes as, “the march of science and the increased capabilities of medicine” (Newhouse 1992). This would be one of the first studies to make notice of the importance of technological advancement as a determinant of health care spending and became vital to regressions. Dreger and Reimers (2005) also looked at technological advancement’s role in rising health care costs but used the term medical advancement. This study utilized a proxy for technology by examining life expectancy, mortality rates, and aging population. Although several studies point out the importance of this variable, very few studies attempted to study the direct relationship between technological progress and health care expenditure, due to the difficulty of finding data for increases in medical care technology and their effects on better health outcomes. Researchers have used a variety of different proxies ranging from R&D spending specific to health care, life expectancy, mortality rates, and the amount of elderly as a share of the population. Other papers have even proxied the effect of technical change by adding a time index, or time-specific intercepts (Baltagi & Moscone 2010). Such a proxy for technological advancement will also be included in this paper using life expectancy lagged to the previous year as our proxy to test the prior year’s life expectancy on the current year’s health care

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