Garber & Skinner 2008

Garber & Skinner 2008 - Journal of Economic...

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Is American Health Care Uniquely Inefficient? Alan M. Garber and Jonathan Skinner A lthough countries around the world are grappling with the problem of rising health expenditures, the United States has reason for particular concern. Americans are dissatisfied with their healthcare system (Schoen et al., 2007) but also spend more than the citizens of other nations: 15 percent of GDP on health care in 2006, compared to 11 percent in France and Germany, 10 percent in Canada, and 8 percent in the United Kingdom and Japan (OECD, 2008). There is no question that the United States spends the most, but some observers view this money as well spent and forecast that future healthcare expen- ditures could optimally account for nearly one-third of GDP (Hall and Jones, 2007). Improvements in cardiovascular health and in the survival of premature infants in the United States have been estimated to be worth their high expenditures (for example, Cutler, 2004; Murphy and Topel, 2006). But the efficiency cost of the U.S. health system has also been estimated at 20–30 percent of healthcare spending, or 3–5 percent of GDP (Fisher et al., 2003a, b; Skinner, Fisher, and Wennberg, 2005), y Alan M. Garber is a staff physician in the Veterans Affairs Palo Alto Health Care System, and Henry J. Kaiser Jr. Professor and Director of both the Center for Health Policy and the Center for Primary Care and Outcomes Research, Stanford University, Stanford, California. He is also the Director of the Health Care Program and Research Associate, National Bureau of Economic Research, Cambridge, Massachusetts. Jonathan Skinner is the John Sloan Dickey Third Century Chair in Economics, Department of Economics, and Professor of Family and Community Medicine, Dartmouth Institute of Health Care Policy and Clinical Practice, both at Dartmouth College, Hanover, New Hampshire, and Research Associate, National Bureau of Economic Research, Cambridge, Massachusetts. Their e-mail addresses are [email protected] stanford.edu and [email protected] , respectively. Journal of Economic Perspectives—Volume 22, Number 4—Fall 2008—Pages 27–50
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and according to some studies, avoidable deaths and medical errors are much more common in the United States than in European countries (Schoen et al., 2007; Nolte and McKee, 2008). In this paper, we address two distinct questions about the efficiency of U.S. healthcare expenditures. First, does U.S. health care display inferior productive efficiency—that is, given a bundle of factor inputs like physicians, nurses, hospital beds, and capital, is the aggregate impact of health care in the United States less than in other countries? This question is surprisingly difficult to answer. Cross- country comparisons of expenditures and health outcomes are common but are also of limited value because of our inability to control adequately for underlying health differences across countries—for example, that Americans are more likely to have diabetes or to be obese compared to the English (Banks, Marmot, Oldfield, and Smith, 2006). Micro-level analyses of specific treatments for comparable pa-
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