ABSTRACT

This chapter focuses on the way medical care affects health. It helps to understand the meaning of marginal productivity, the difference between average and marginal productivity, and the meaning of "extensive" and "intensive" margins. The chapter reviews estimates of the productivity of medical care in producing health at an aggregate level. One way to think about declining marginal productivity is to look at the populations for which a particular medical treatment might be used. Another way to increase the use of medical care resources is the intensive margin. Aggregate data studies of the relationships between mortality and health care invariably show that four things move in parallel: per capita income, per capita education, medical care use, and good health outcomes. Education is indeed a powerful engine for sustained economic growth. After middle age, the health-spending elasticity falls steadily with age.