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This study considers an aggregate life expectancy production function for a sample of developed countries. We find that pharmaceutical consumption has a positive effect on life expectancy at middle and advanced ages but is sensitive to the age distribution of a given country. Thus, ignoring age distribution in a regression of life expectancy on pharmaceutical consumption creates an omitted variable bias in the pharmaceutical coefficient. We find that doubling annual pharmaceutical expenditures adds about one year of life expectancy for males at age 40 and slightly less than a year of life expectancy for females at age 65. We also present results for lifestyle inputs into the production of life expectancy. For example, decreasing tobacco consumption by about two cigarettes per day or increasing fruit and vegetable consumption by 30% (one-third pound per day) increases life expectancy approximately one year for 40-year-old females. JEL Classification: 112 example, Gradstein and Kaganovich (2004) conclude that increasing longevity results in increasing public funding of education and economic growth. Cremer, Lozachmeur, and Pestieau (2004, p. 2260) argue that early retirement "puts pressure on the financing of healthcare and pension schemes [and this pressure] is made worse by growing longevity." While typically assumed strictly exogenous for the purpose of policy analysis, it has been argued that life expectancy (or more broadly "health") is predetermined by behavioral and policy variables in what can be loosely described as a production function for health. Estimating this function is the goal of this study. Auster, Leveson, and Sarachek (1969) were the first economists to study a population production function for health: a regression of state-level mortality rates on medical care and environmental variables. Today their research motivations and questions remain compelling. Indeed, given the size 768

SUMMARYCost recovery, or the pricing of health-care services in government-run health-care facilities, continues to be a politically delicate subject in Sub-Saharan Africa. Nevertheless, ministries of health are now beginning to understand that the selective pricing of healthcare services can be a powerful tool for achieving the efficiency and equity goals that their governments have set, and for increasing ministry financial resources that can be used to improve the quality of care offered. This article provides a blue-print for these nascent cost-recovery efforts. After a consideration of the rationale for cost recovery within a theoretical context, a set of pricing principles for the whole public health sector is presented and a prototypical systemic price schedule is derived from the principles. Constraints to effective and equitable cost recovery are then discussed, and topics for further empirical research are suggested.

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The administrative costs of Blue Cross and Blue Shield are examined in this paper. The main finding is that the Blues appear to enjoy substantial managerial slack. This striking conclusion is based upon some rather circumstantial evidence. First, no economies of scale are found which is not true of the commercial insurers. Second, the variance in costs is much smaller for those costs associated with Medicare administration than for the Blues own business. Finally, despite the cost advantages of the merged organizational form, this is not the more prevalent form.