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Nordic Economic Policy Review

Challenges in health care financing and provision

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The Nordic Economic Policy Review is published by the Nordic Council of Ministers and addresses policy issues in a way that is useful for in-formed non-specialists as well as for professional economists. All articles are commissioned from leading professional economists and are subject to peer review prior to publication. The review appears twice a year. Content: Challenges in health care financing and provision - Tor Iversen and Sverre A.C. Kittelsen Ageing populations: More care or just later care? - Terkel Christiansen, Jørgen Lauridsen and Mickael Bech Comment by Anna Lilja Gunnarsdottir Lifestyle, health and costs – what does available evidence suggest? - Kristian Bolin Comment by Tinna Laufey Ásgeirsdóttir The economics of long-term care: A survey - Helmuth Cremer, Pierre Pestieau and Gregory Ponthiere Comment by Þórólfur Matthíasson The role of primary health care in controlling the cost of specialist health care - Stephen Beales and Peter C. Smith Comment by Helgi Tómasson Payments in support of effective primary care for chronic conditions - Randall P. Ellis and Arlene S. Ash Comment by Jørgen T. Lauridsen An economic assessment of price rationing versus non-price rationing of health care - Luigi Siciliani Comment by Mickael Bech Should pharmaceutical costs be curbed? - Kurt R. Brekke, Dag Morten Dalen and Steinar Strøm Comment by Helgi Tómasson Productivity differences in Nordic hospitals: Can we learn from Finland? - Clas Rehnberg and Unto Häkkinen Comment by Thorvaldur Gylfason

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Challenges in health care financing and provision

Good health is highly valued and a prerequisite for taking full benefit of a rising level of income. Hence, the willingness to pay for improved health is likely to rise sharply with income, and so is the willingness to pay for health care, since health care is a vital input in the production of health. Hall and Jones (2007) claim that as people get richer and consumption rises, the marginal utility of consumption falls rapidly. Furthermore, the marginal utility of life extension does not decline and spending on health to extend life allows individuals to purchase additional periods of utility. As a result, the optimal composition of total spending shifts toward health, and the health share grows along with income. In projections based on their quantitative model, they find that the optimal health share of spending seems likely to exceed 30 percent in the US by the middle of the century. This is consistent with the development of health care spending as a percentage of GDP illustrated by Figure 1. All Western countries have had an increase in the share of GDP used on health care since the 1960's. While the US has continued on a rising trend, the share seems to have more or less stabilized in the Nordic and other European countries since the 1990's. Note that the figure does not show the actual level of health care received by the citizens, since the countries also vary in income, cost level and the extent of informal care.

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