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Relative (in)efficiency and its opportunity cost of the U.S healthcare spending: a data envelopment analysis approach

Author

Listed:
  • Hyungue Lim

    (Bryant University)

  • Jongsung Kim

    (Bryant University)

Abstract

Among the OECD countries, the U.S. spends the most on healthcare. However, the health outcome of the U.S. population, measured by life expectancy at birth, is not better than that of other high-income OECD countries. This signals an inefficiency in healthcare spending in the U.S. We use the Data Envelopment Analysis (DEA) to measure such inefficiencies. DEA results provide information about what optimal outcome could have been at certain point in time. We further calculate the aggregated value of inefficient healthcare spending in the U.S. and call this value the opportunity cost. We found that from 2000 to 2017, the opportunity cost was at least 3% of the GDP each year, and the total value of the opportunity cost amounted to at least 26% of 2017 GDP.

Suggested Citation

  • Hyungue Lim & Jongsung Kim, 2022. "Relative (in)efficiency and its opportunity cost of the U.S healthcare spending: a data envelopment analysis approach," Economics Bulletin, AccessEcon, vol. 42(2), pages 990-1001.
    • Handle: RePEc:ebl:ecbull:eb-21-00347
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    References listed on IDEAS

    as
    1. Kuosmanen, Timo & Cherchye, Laurens & Sipilainen, Timo, 2006. "The law of one price in data envelopment analysis: Restricting weight flexibility across firms," European Journal of Operational Research, Elsevier, vol. 170(3), pages 735-757, May.
    2. Asandului, Laura & Roman, Monica & Fatulescu, Puiu, 2013. "The Efficiency of Healthcare Systems in Europe: a Data Envelopment Analysis Approach," MPRA Paper 58954, University Library of Munich, Germany, revised Apr 2014.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Healthcare Expenditure; Opportunity Cost; Life Expectancy; DEA; Efficiency;
    All these keywords.

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • D6 - Microeconomics - - Welfare Economics

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