Journal of Economic Perspectives: Vol. 25 No. 2 (Spring 2011)


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The (Paper)Work of Medicine: Understanding International Medical Costs

Article Citation

Cutler, David M., and Dan P. Ly. 2011. "The (Paper)Work of Medicine: Understanding International Medical Costs." Journal of Economic Perspectives, 25(2): 3-25.

DOI: 10.1257/jep.25.2.3


This paper draws on international evidence on medical spending to examine what the United States can learn about making its healthcare system more efficient. We focus primarily on understanding contemporaneous differences in the level of spending, generally from the 2000s. Medical spending differs across countries either because the price of services differs (for example, a coronary bypass surgery operation may cost more in the United States than in other countries) or because people receive more services in some countries than in others (for example, more bypass surgery operations). Within the price category, there are two further issues: whether factors earn different returns across countries and whether more clinical or administrative personnel are required to deliver the same care in different countries. We first present the results of a decomposition of healthcare spending along these lines in the United States and in Canada. We then delve into each component in more detail—administrative costs, factor prices, and the provision of care received—bringing in a broader range of international evidence when possible. Finally, we touch upon the organization of primary and chronic disease care and discuss possible gains in that area.

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Cutler, David M. (Harvard U)
Ly, Dan P. (Harvard U)

JEL Classifications

I11: Analysis of Health Care Markets


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