The trade-off between equity and efficiency in population health gain: Making it real

Abstract

Two fundamental goals of health systems are to maximise overall population health gain (referred to as efficiency) and to minimise unfair health inequalities (equity). Often there is a trade-off in maximising efficiency vis a vis equity and the relative weight given to one goal over the other is acknowledged to be essentially a value judgement. Health systems necessarily make those value judgements but in making them would benefit from relevant and accurate opportunity cost information. Unfortunately the development of practical tools to measure equity-efficiency trade-offs has lagged theoretical advances in this area. We address this gap by presenting a practical technique to reveal opportunity costs of equity (and efficiency) gains in decentralised population-based health systems, applying stochastic data envelopment analysis to ethnic-specific life expectancy (LE) changes for 20 New Zealand (NZ) District Health Boards for the inter-census period 2006–2013, thereby deriving a notional health frontier from 10,000 Monte Carlo simulations. Four different ways to increase health equity emerge. These show that a trade-off between equity and efficiency does not always exist. In particular, improving both productive efficiency and allocative efficiency (up to its maximum) can also yield gains in equity through reductions in LE inequalities. However, in NZ's case, the opportunity cost (in sacrificed European life-years) of achieving gains in equity beyond the point of maximum productive and allocative efficiency is relatively high, even for quite small reductions in the LE gap between Māori and European populations. This high opportunity cost may explain why, despite governments' strong rhetorical commitment to equity, NZ's health gains have not strayed far from the path of maximising allocative efficiency. Nevertheless, this opportunity cost could be reduced significantly by measures which shift the health frontier outward, highlighting the importance of technical and organisational innovation as potential drivers of greater equity in health outcomes.