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November 25, 2008

On the Awfulness of U.S. Healthcare

Good new issue out of the Journal of Economic Perspectives, much of it about healthcare economics. I'm particularly fond of this paper which really pile-drives into your skull the awfulness of U.S. healthcare, given its cost:

Is American Health Care Uniquely Inefficient?
Authors: Garber, Alan M.; Skinner, Jonathan

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.

In short, the U.S. approach to healthcare is sort of like that of an over-monied drunk to alcohol: We drink too much, generally go straight for the most expensive booze, and stubbornly try to justify the lousy taste the vomitous morning after.

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