This dissertation sets out to determine if the health care sector suffers from low productivity growth and the implications on government finances in the long run. I use the condition treatment approach to measure utilization and price growth in the health care sector with the Medical Expenditures Panel Survey data from 2003-2011. While official inflation estimates are found to be biased by up to 1% per year, health care prices were still growing much faster than other prices. However, this is only true for certain segments of the population. Diseases and other medical conditions experience different productivity growth rates and are distributed uniformly across the population. I also find that much of the inflation is concentrated in ambulatory care events. I test to see if technology is driving event-level inflation by controlling for individual procedures. Contrary to other studies, I find little evidence to support the claim that technology is the main reason behind health care inflation. The results suggest that the health care sector may suffer from the Cost Disease. To study the implication on taxes, I build a theoretical model of unbalanced growth between private and publicly provided goods. As long as the two goods are not substitutable, the tax rate is pushed to the top of the Laffer Curve and redistribution is crowded out in the long-run.