What Values and Priorities Mean for Health Reform
Citation:
Baicker, Katherine, and Amitabh Chandra. "What Values and Priorities Mean for Health Reform." New England Journal of Medicine (September 16, 2020). View Details|
Article Quarterly Journal of Economics May 2020 Identifying Sources of Inefficiency in Health Care |
Abstract
In medicine, the reasons for variation in treatment rates across hospitals serving similar patients are not well understood. Some interpret this variation as unwarranted and push standardization of care as a way of reducing allocative inefficiency. However, an alternative interpretation is that hospitals with greater expertise in a treatment use it more because of their comparative advantage, suggesting that standardization is misguided. We develop a simple economic model that provides an empirical framework to separate these explanations. Estimating this model with data on treatments for heart attack patients, we find evidence of substantial variation across hospitals in both allocative inefficiency and comparative advantage, with most hospitals overusing treatment in part because of incorrect beliefs about their comparative advantage. A stylized welfare-calculation suggests that eliminating allocative inefficiency would increase the total benefits from this treatment by about a third.
Keywords: Health Care and Treatment; Performance Efficiency; Performance Productivity; Mathematical Methods;
Citation:
Chandra, Amitabh, and Douglas O. Staiger. "Identifying Sources of Inefficiency in Health Care." Quarterly Journal of Economics 135, no. 2 (May 2020): 785–843.
