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Is American Health Care Uniquely Inefficient?

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  • Alan M. Garber
  • Jonathan Skinner

Abstract

The U.S. health system has been described as the most competitive, heterogeneous, inefficient, fragmented, and advanced system of care in the world. In this paper, we consider two questions: First, is the U.S. healthcare system productively efficient relative to other wealthy countries, in the sense of producing better health for a given bundle of hospital beds, physicians, nurses, and other factor inputs? Second, is the United States allocatively efficient relative to other countries, in the sense of providing highly valued care to consumers? For both questions, the answer is most likely no. Although no country can claim to have eliminated inefficiency, the United States has high administrative costs, fragmented care, and stands out with regard to heterogeneity in treatment because of race, income, and geography. The U.S. healthcare system is also more likely to pay for diagnostic tests, treatments, and other forms of care before effectiveness is established and with little consideration of the value they provide. A number of proposed reforms that are designed to ameliorate shortcomings of the U.S. healthcare system, such as quality improvement initiatives and coverage expansions, are unlikely by themselves to reduce expenditures. Addressing allocative inefficiency is a far more difficult task but central to controlling costs.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.22.4.27
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 22 (2008)
Issue (Month): 4 (Fall)
Pages: 27-50

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Handle: RePEc:aea:jecper:v:22:y:2008:i:4:p:27-50

Note: DOI: 10.1257/jep.22.4.27
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Cited by:
  1. Jabłonowski, Janusz & Müller, Christoph & Raffelhüschen, Bernd, 2010. "A fiscal outlook for Poland using generational accounts," FZG Discussion Papers 47, Research Center for Generational Contracts (FZG), University of Freiburg.
  2. Stephen Hall & P. A. V. B. Swamy & George S. Tavlas, 2011. "Generalized Cointegration: A New Concept with an Application to Health Expenditure and Health Outcomes," Discussion Papers in Economics 11/22, Department of Economics, University of Leicester.
  3. Janet Currie & W. Bentley MacLeod, 2013. "Diagnosis and Unnecessary Procedure Use: Evidence from C-Section," NBER Working Papers 18977, National Bureau of Economic Research, Inc.
  4. Pablo Hernández de Cos & Enrique Moral-Benito, 2011. "Health care expenditure in the oecd countries: efficiency and regulation," Banco de Espa�a Occasional Papers 1107, Banco de Espa�a.
  5. Melberg, Hans Olav, 2011. "Some problems with international comparisons of health spending – and a suggestion about how to quantify the size of the problems," HERO On line Working Paper Series, Oslo University, Health Economics Research Programme 2011:4, Oslo University, Health Economics Research Programme.
  6. Jason Abaluck & Leila Agha & Christopher Kabrhel & Ali Raja & Arjun Venkatesh, 2014. "Negative Tests and the Efficiency of Medical Care: What Determines Heterogeneity in Imaging Behavior?," NBER Working Papers 19956, National Bureau of Economic Research, Inc.
  7. Hendrik Jürges & Vincent Pohl, 2012. "Medical guidelines, physician density, and quality of care: evidence from German SHARE data," The European Journal of Health Economics, Springer, Springer, vol. 13(5), pages 635-649, October.
  8. Eric Nauenberg, 2014. "Changing Healthcare Capital-To-Labor Ratios: Evidence and Implications for Bending the Cost Curve in Canada and Beyond," Working Papers 140002, Canadian Centre for Health Economics, revised Jul 2014.
  9. Samuel H. Preston & Jessica Y. Ho, 2009. "Low Life Expectancy in the United States: Is the Health Care System at Fault?," NBER Working Papers 15213, National Bureau of Economic Research, Inc.
  10. Jonathan Gruber & Helen Levy, 2009. "The Evolution of Medical Spending Risk," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 23(4), pages 25-48, Fall.
  11. Dominic Coey, 2013. "Physician Incentives and Treatment Choices in Heart Attack Management," Discussion Papers, Stanford Institute for Economic Policy Research 12-027, Stanford Institute for Economic Policy Research.

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