The inefficient effects of non-clinical factors on health care costs

Shawn McFarland and Jonathan Miller

Health Economics, Policy and Law, 2024, vol. 19, issue 4, 459-473

Abstract: We use Benford's law to examine the non-random elements of health care costs. We find that as health care expenditures increase, the conformity to the expected distribution of naturally occurring numbers worsens, indicating a tendency towards inefficient treatment. Government insurers follow Benford's law better than private insurers indicating more efficient treatment. Surprisingly, self-insured patients suffer the most from non-clinical cost factors. We suggest that cost saving efforts to reduce non-clinical expenses should be focused on more severe, costly encounters. Doing so focuses cost reduction efforts on less than 10% of encounters that constitute over 70% of dollars spent on health care treatment.

Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:cup:hecopl:v:19:y:2024:i:4:p:459-473_5

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