Efficiency and Inefficiency of Health Expenditure Chile, 1990-1999

Abstract

The paper reviews the most common economic approach to efficiency analysis of health expenditure in the public sector, based on a recent study by economists Tokman and Rodriguez for the 1990-99 period. In such a study, those authors use the public budget (denominator) against a “valued production” construct (numerator), built by multiplying the physical production of health services by their average expenditure (it should have been cost, anyway). The critique here presented contrasts that method by comparing it with a similar indicator in which the numerator is the physical production WITHOUT any weighting. Thus, the article finds an effectivity improvement of 75% over the period -services per head go from 5.4 to 9.4 per head-, against a mere 22% by the economists’ approach, while financial gains decrease by only -39%, instead of an originally calculated -55%. The article interprets the- 39% as cost-increase, not inefficiency, a figure still below the combined IPC for the decade. Finally, the author criticizes the economic approach which compares resources with resources, that is “means” among themselves, and not means against “objectives” which is the public health standard approach. On a general systems approach basis, the author states that the economic method degrades and deconstructs the health services system and obtains results only valid for one component -the monetary one- without relevance to the original system as such. A full list of public health conclusions closes the article.