Is American Health Care Uniquely Inefficient?

41 Pages Posted: 1 Sep 2008  

Alan M. Garber

Stanford University - Center for Primary Care and Outcomes Research; Government of the United States of America - Palo Alto Veterans Affairs Medical Center; National Bureau of Economic Research (NBER)

Jonathan S. Skinner

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: August 2008

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. health care 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 U.S. 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 U.S. has fragmented care, high administrative costs, and stands out with regard to heterogeneity in treatment because of race, income, and geography. The U.S. health care 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. health care 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.

Suggested Citation

Garber, Alan M. and Skinner, Jonathan S., Is American Health Care Uniquely Inefficient? (August 2008). NBER Working Paper No. w14257. Available at SSRN: https://ssrn.com/abstract=1260583

Alan M. Garber (Contact Author)

Government of the United States of America - Palo Alto Veterans Affairs Medical Center

Palo Alto, CA 94304
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Stanford University - Center for Primary Care and Outcomes Research ( email )

179 Encina Commons
Stanford, CA 94305-6019
United States
650-723-0920 (Phone)
650-724-5182 (Fax)

Jonathan S. Skinner

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
603-646-2535 (Phone)

Dartmouth College - Department of Economics ( email )

Hanover, NH 03755
United States
603-646-2535 (Phone)

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