Benefits to Society from Health Care Expenses: Do We Get More for Higher Spending?
Rosa M. Abrantes-Metz
Global Economics Group, LLC; New York University - Leonard N. Stern School of Business - Department of Economics
May 31, 2012
This article is motivated by the recent health care reform and the general debate on the issues facing the industry, in the wake of the upcoming Supreme Court decision on the matter.
It has been argued that the United States spends more on health care as a percentage of its GDP than any other industrialized country, and that presumably is inherently bad. In order to test this presumption, I put forward two simple international comparisons to study whether more spending in health care is correlated with higher benefits across multiple countries.The results confirm that to be the case.
I further argue that much of the debate over health care reform in the United States has been focused solely on short-run (even static) analysis without consideration for longer-term efficiencies. It is important to keep in mind that it is today’s costly innovation which allows for better quality health care tomorrow. Imposing policies which punish innovation as a way to reduce costs can lead to lower costs today, but it may not be true that they will lead to lower costs tomorrow – particularly if cost is measured in units of quality care. Indeed, I argue that “total health care expenditures” is not the relevant metric for policymakers, but rather that the price of one unit of constant quality health care is a more appropriate concept. Unfortunately to my knowledge such measures have yet to be appropriately developed.
Number of Pages in PDF File: 12
Keywords: Health care, costs, benefits, international comparisons, price adjusted for quality
JEL Classification: C33, D61, I11
Date posted: June 7, 2012