Productivity in U.S. health care has been rising at about 1.0 percent annually when health outcomes are factored into cost measurements, according to a pair of studies from the Commerce Department's Bureau of Economic Analysis published this month and analyzed in a June 3, 2026 report by the American Enterprise Institute. The research challenges the conventional view that rising U.S. health spending goes mainly toward maintaining existing standards rather than delivering better outcomes.

The first BEA study, authored by Calvin Ackley and Abe Dunn of the BEA and John A. Romley of the University of Southern California, examined Medicare fee-for-service patients across nine common conditions including hip fractures, heart disease, and pneumonia from 2002 to 2021. That analysis estimated annual productivity improvement at 7.5 percent for treating these specific conditions. The second study, by Eli Liebman of the University of Georgia alongside the three original authors, used population-wide health outcome data to estimate productivity across the entire health sector, arriving at the roughly 1.0 percent annual figure. Both studies combined treatment costs with measures of health status results to create quality-adjusted price calculations.

The report finds that "new therapies and intervention techniques are constantly being introduced that help patients live longer and with more functional capacity," meaning at least some higher annual spending produces health improvements that wouldn't have occurred under previous clinical protocols. According to AEI senior fellow James C. Capretta, the authors examined whether observed price rises for treating certain conditions could be quality-adjusted to isolate productivity increases, controlling for improvements in longevity and functional capacity. The research notes that important assumptions like the dollar value assigned to improved health outcomes "can shift this estimate substantially in either direction."

The analysis identifies two main drivers behind productivity gains: new therapies for high-volume conditions like HIV and Hepatitis C that add upfront costs but produce substantial health outcome improvements, and patent expirations for common treatments such as heart disease drugs, which lead to broader uptake of cheaper generics and better population health. While the U.S. has higher per capita health costs than other wealthy nations, the report argues it's also "on the outer edge in terms of its openness to innovation and technological improvements," potentially positioning it to capture productivity-enhancing breakthroughs that get introduced domestically before spreading to countries with tighter regulations.

The report acknowledges several important caveats: many sources of population health improvements like better nutrition and environmental conditions aren't directly tied to medical services, other countries with stricter regulations have also seen substantial longevity gains, and improvements in treating some conditions don't mean the U.S. has eliminated wasteful spending systemwide. According to Capretta, "there is ample evidence that needlessly high pricing of some services continues because of various market distortions," and in some cases patients receive services offering very little health benefit. Still, the analysis concludes that "the ceiling on annual productivity improvement in U.S. health care remains high" because while past innovations are helping, "there are many unexploited opportunities for further efficiency-improving changes."