The Relative Efficiency of Public and Private Health Care

26 Pages Posted: 5 Jul 2011 Last revised: 2 Mar 2014

See all articles by Tilman Tacke

Tilman Tacke

University of Rome Tor Vergata

Robert Waldmann

Universita di Roma Tor Vergata; National Bureau of Economic Research (NBER)

Date Written: July 5, 2011

Abstract

A health care system is efficient when an increase in spending results in significant improvements in the health of a population. We test the relative efficiency of public and private health care spending in reducing infant and child mortality using cross-national data for 163 countries. There are two remarkable findings: First, an increase in public funds is both, significantly correlated with a lower mortality and significantly more efficient in reducing mortality than private health care expenditure. Second, private health care expenditure is in all estimations associated with higher, not lower, mortality, although this association is often not statistically significant. The results suggest, holding total health care expenditure constant, a potential decrease in total infant mortality in the 163 countries from 6.9 million deaths (2002) to 4.2-5.3 million deaths for completely publicly financed health care systems, but an increase to 9.0-10.0 million deaths for completely privately financed health care. We can explain some of the estimated difference in the efficiency of public and private health care expenditure by geographies and socioeconomic factors such as HIV prevalence, sanitation standards, corruption, and income distribution. However, the efficiency difference remains large and statistically significant in all regressions.

Keywords: Infant Mortality, Public, Private, Health Care

JEL Classification: I14, I18, H19

Suggested Citation

Tacke, Tilman and Waldmann, Robert, The Relative Efficiency of Public and Private Health Care (July 5, 2011). CEIS Working Paper No. 202. Available at SSRN: https://ssrn.com/abstract=1879136 or http://dx.doi.org/10.2139/ssrn.1879136

Tilman Tacke

University of Rome Tor Vergata ( email )

Via di Tor Vergata
Rome, Lazio 00133
Italy

Robert Waldmann (Contact Author)

Universita di Roma Tor Vergata ( email )

Piazzale Aldo Moro 5
Roma, Rome 00185
Italy

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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