CEIS Research Papers

The Relative Efficiency of Public and Private Health Care
Tacke Tilman and Waldmann Robert J.
CEIS Research Paper

A health care system is e¢ cient when an increase in spending results in significant improvements in the health of a population. We test the relative efficiency of public and private health care spending in reducing infant and child mortality using cross-national data for 163 countries. There are two remarkable ?ndings: First, an increase in public funds is both, significantly correlated with a lower mortality and signi?cantly more e¢ cient in reducing mortality than private health care expenditure. Second, private health care expenditure is in all estimations associated with higher, not lower, mortality, although this association is often not statistically significant. The results suggest, holding total health care expenditure constant, a potential decrease in total infant mortality in the 163 countries from 6.9 million deaths (2002) to 4.2-5.3 million deaths for completely publicly financed health care systems, but an increase to 9.0-10.0 million deaths for completely privately financed health care. We can explain some of the estimated difference in the efficiency of public and private health care expenditure by geographies and socioeconomic factors such as HIV prevalence, sanitation standards, corruption, and income distribution. However, the efficiency dfference remains large and statistically significant in all regressions.

Number: 202

Keywords: Infant Mortality, Public, Private, Health Care

JEL-codes: I-14 I-18 H-19

Date: 30/06/2011