Macro-level efficiency of health expenditure: Estimates for 15 major economies

Chen, Simiao and Kuhn, Michael and Prettner, Klaus ORCID: https://orcid.org/0000-0002-8971-8750 and Bloom, David E. and Wang, Chen (2021) Macro-level efficiency of health expenditure: Estimates for 15 major economies. Social Science & Medicine (114270). ISSN 0277-9536

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Abstract

The coronavirus disease 2019 (COVID-19) pandemic highlights the importance of strong and resilient health systems. Yet how much a society should spend on healthcare is difficult to determine because additional health expenditures imply lower expenditures on other types of consumption. Furthermore, the welfare-maximizing (“efficient”) aggregate amount and composition of health expenditures depend on efficiency concepts at three levels that often get blurred in the debate. While the understanding of efficiency is good at the micro- and meso-levels—that is, relating to minimal spending for a given bundle of treatments and to the optimal mix of different treatments, respectively—this understanding rarely links to the efficiency of aggregate health expenditure at the macroeconomic level. While micro- and meso-efficiency are necessary for macro-efficiency, they are not sufficient. We propose a novel framework of a macro-efficiency score to assess welfare-maximizing aggregate health expenditure. This allows us to assess the extent to which selected major economies underspend or overspend on health relative to their gross domestic products per capita. We find that all economies under consideration underspend on healthcare with the exception of the United States. Underspending is particularly severe in China, India, and the Russian Federation. Our study emphasizes that the major and urgent issue in many countries is underspending on health at the macroeconomic level, rather than containing costs at the microeconomic level.

Item Type: Article
Additional Information: In Press, Journal Pre-proof
Keywords: Health expenditure, Efficiency Value of statistical life, Welfare Macroeconomics, Health care systems, Macro-efficiency test
Divisions: Departments > Volkswirtschaft > Makroökonomie
Version of the Document: Accepted for Publication
Depositing User: Gertraud Novotny
Date Deposited: 04 Aug 2021 16:23
Last Modified: 04 Aug 2021 16:23
Related URLs:
FIDES Link: https://bach.wu.ac.at/d/research/results/100919/
URI: https://epub.wu.ac.at/id/eprint/8232

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