Free Critical Thinking On Is American Health Care Uniquely Inefficient

In 2006, the United States uses fifteen percent of their gross domestic product on health care system Countries such as, Germany and Canada spent 11 and 15 percent respectively in the same year. This shows that America spends more than other high income countries. The increase in expenditure has contributed to the decrease in the number of infant mortality and improvement in cardiovascular health. However, when this expenditure is compared with that of Germany the scenario depicts productive inefficiency given the inputs bundles of doctors, capital, hospice cot and nurses. This is contributed by financial constrains, cost differentiation across race, geography and high administrative expenditure.
The productivity of a unit service is used to measure the productivity efficiency of the health care system. This concept compares the utilization of resources in two hospitals or countries. The outcome of productivity for instance, the survival rate of patients from treatment can be used to determine whether the opportunity cost of investing on health care is beneficial as compared to redirecting the resources to other sectors of the economy. A given choice of inputs for instance, physicians and nurses that offer the lowest cost in the provision of health care gives production efficiency. However, the choice may not reflect allocative efficiency of choice. Allocative efficiency is dependent on marginal rate of substitution between physicians and nurses. The combined choice of physicians and nurses should not exceed the technically feasible choice. Allocative efficiency stipulates that allocation should not exceed the resource available in the production possibility frontier. At the point of tangency between the indifference curve and the budget line will yield the maximum welfare gain.
Reforming the health care system especially health expenditure through insurance in fundamental in improving the allocative efficiency of health inputs that maximizes welfare gain while minimal effects on production efficiency are encountered. The United States is rational in increasing the proportion of income spent on saving lives. Increase in health incomes increases the marginal value of saving life instead of foregoing this to purchase cars that have a diminishing marginal utility.