Health Care Productivity

IN ALL OF THE INDUSTRIAL COUNTRIES, a high fraction of gross domestic product (GDP), ranging from approximately 7 percent in the United Kingdom to 14 percent in the United States, is devoted to health care. In recent years policymakers have been forced to try to trim health care benefits or other social services, and the health care systems of almost all the industrial countries have come under significant pressure to control expenditures and improve performance. Although each nation's health care system operates with a mixture of regulation and market mechanisms, there are great differences among them. And these differences suggest that policymakers could learn important lessons by comparing performances across countries. Thus far, however, no single system is recognized as being the most productive or as having achieved the right blend of competition and regulation. No system provides the paradigm for others. Some observers of the U.S. health care system argue that aggregate data indicate poor performance. Figure 1 shows aggregate spending data for Germany, the United Kingdom, and the United States; with the highest level of GDP and the largest fraction of spending, the United States spends much more per capita on health than the other two countries. Figure 2 provides a simple aggregate performance measure. Average life expectancy at birth in the United States is lower than in Germany and the United Kingdom, although, as the figure also shows,