The American Healthcare System: The Most Inefficient Healthcare System In The World

1622 Words 7 Pages
The United States healthcare system is often characterized as inefficient. This inefficiency becomes apparent when the U.S. healthcare system is compared to systems of other countries in the Organization for Economic Cooperation and Development (OECD). The U.S. spends a much larger portion of its GDP on healthcare than any other OECD country, but experiences no better health outcomes in most cases. When the concept of efficiency within the healthcare market is understood, it is evident that the inefficiency that occurs within the U.S. healthcare system results largely from the structure of the private health insurance system in addition to the heterogeneity within the U.S. population.
To understand why the U.S. healthcare system is
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It relates how inputs and money are dispersed across sectors with the total benefits received. A market experiences allocative inefficiency if the funds being used in that market could be used in a different market that creates a higher level of consumer benefits. Within the healthcare system, allocative inefficiency is experienced if the money spent on healthcare could be used elsewhere in order to experience a higher total benefit from the money. Allocative inefficiency within healthcare results when consumers are consuming above the optimal level of healthcare. This means that U.S. consumers are either consuming an excessive amount of healthcare, or consuming at costs that are much too high relative to the benefit (Garber and Skinner 36). The funds that are creating little to no marginal benefit in the healthcare market could be used somewhere else to gain a higher benefit.
The structure of the private health insurance market is one reason as to why inefficiency is occurring within the U.S. system. More specifically, inefficiency results from the relationship between the insurance companies and patients. When consumers purchase health insurance policies, they become shielded from the full cost of medical care. Upon receiving medical care, consumers only need to pay a fraction of the full cost, which is called the copay. This creates a moral hazard problem within the system. That is, the behavior of consumers changes upon…