Health Care productivity

By Ken Arrow, Martin Baily, Axel Börsch-Supan, Alan M. Gaber

Health care's growing share of GDP makes improving productivity in this sector vitally important. MGI compared the productivity of health care systems in the US, Germany, and the UK and found that the US was in the lead.

Healthcare's growing share of GDP makes improving productivity in this sector vitally important. MGI compared the productivity of healthcare systems in the US, Germany, and the UK and found that the US was in the lead.

Objectives and approach

In recent years, the health care systems of almost all major industrialized countries have come under significant pressure to improve performance. This MGI study seeks to assess differing productivity levels at the disease level, examine the major source of these differences, and identify implications.

Summary of health care system structure and regulation

The US was the most product-based system with substantial freedom for payors and providers giving the US system relatively high levels of competitive intensity but generally low product integration. The UK system was the most centrally controlled of the three and had low competitive intensity but high product integration. While the German system was highly regulated, it had relatively low levels of competitive intensity and product integration.

Diabetes case

With better outcomes and fewer inputs, the UK was clearly more productive than the US in diabetes treatment. The UK's productivity efficiency stemmed from its consistently lower complication rates.

Cholelithiasis (gallstones) case

The US was more productive than the UK on a per-operation, per-laparoscopic cholecystectomy, and per-open cholecystectomy basis because it used fewer inputs in each case while achieving the same outcomes. Germany was more productive than the UK on a per-operation basis.

Breast cancer case

The most important factor in the US' better productivity levels compared to the UK was the less prevalent screening in the UK Germany's productive efficiency relative to the US was lowered by its longer hospital length of stay.

Lung cancer case

Germany uses 21 percent more inputs and achieved 12 percent worse outcomes than the US in the treatment of lung cancer. The UK productivity levels were even worse.

Cross-disease synthesis

The speed and extent of technology adoption along with the intensity in care triaging were the most important drivers in determing productivity differences between the US and UK The more frequent inpatient care and lengthier care were the most important drivers of Germany's lower productivity relative to the US.

Aggregate-level analyses

While at the aggregate level, life expectancy outcomes showed no significant differences among the US, Germany, and UK, significant variations in treatment outcomes were observable at the disease level. In the disease case studies, outcomes were generally best in the US and worst in the UK.

Implications for policymakers and health care organizations

MGI's study suggests three broad principles for improving productive efficiency: recognize and leverage the power of economic incentives, allow markets to define health care products broadly and ensure that there are not regulatory barriers, and allow for experimentation and flexibility in the system on the part of health care organizations and providers.

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