Estimating the efficiency of the system of healthcare financing in achieving better health

Abstract

This paper contributes to the effort to model and measure how the method of financing of health expenditure affects the efficiency with which better health can be achieved. The focus is on the health system efficiency at the country level, which provides an alternative to the work done in the WHO in this regard. The approach uses frontier techniques as in the WHO studies; however the paper appeals to the economic index number theory of quantity and productivity indexes, which have well-established axiomatic properties, and provides a means for aggregating multiple health output proxies without having to attach arbitrary weights. This allows the proposal of a specification that embeds health sector performance in a broader index of economic inputs and outputs and allows for comparisons across countries and time.