A Satellite Account for Health in the United States

Estimating medical care productivity is a central economic challenge. This paper develops a satellite account for the US health sector that appropriately measures health care productivity and applies that to the elderly population between 1999 and 2012. The central output of the satellite account is health. The primary input is medical care; we also examine the impact of behavioral risk factors. Our empirical work measures the change in medical spending and health outcomes for a comprehensive set of 80 conditions. We estimate that medical care has positive productivity as a whole, with aggregate productivity growth of 9% over the time period. However, there is significant heterogeneity in productivity by condition. At the upper end, care for cardiovascular disease has been extremely productive. In contrast, care for people with mental illness and musculoskeletal conditions has been costly but not productive.