Flat-of-the-curve medicine: a new perspective on the production of health

Johannes Schoder,Peter Zweifel

doi:10.1186/2191-1991-1-2

Abstract

Health economists have studied the determinants of the expected value of health status as a function of medical and non-medical inputs, often finding small marginal effects of the former. However, medical inputs may have an additional benefit in the form of a reduced variability of health status. Using the standard deviation of life expectancy in 24 OECD countries between 1960 and 2005, a 10 percent increase of health care expenditure is associated with a decrease of an estimated 0.42 percent. Willingness to pay for such a reduction of uncertainty may well exceed the extra health care expenditure in the United States and Switzerland. This implies that even in these two countries with very high health care expenditure per capita, flat-of-the-curve medicine need not be wasteful.JEL-Classification: I12, J10

Highlights

Industrial countries have been spending a rising share of their economic resources on health care
As to research question Q1 stated at the beginning of this paper, we can conclude that the countries in our sample operate on the flat-of-the-curve
This study addresses an issue that has been overlooked in the production of health literature with its emphasis on flat-of-the-curve medicine

Summary

Introduction

Industrial countries have been spending a rising share of their economic resources on health care. From 1960 to 2004 health care expenditure (HCE) of OECD countries increased from 3.8 percent of GDP to 8.9 percent on average. Health outcomes measured by average life expectancy at birth improved from 68.4 to 78.5 years. Since HCE continued to grow at a rate of 7.7 percent p.a. between 1980 and 2004, this has often been interpreted as evidence of decreasing marginal returns ("flat-of-the-curve medicine"; [1,2]), raising the question of why citizens and governments failed to reallocate resources away from medicine

Methods

Results

Conclusion