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Estimating Marginal Returns to Medical Care: Evidence from At-Risk Newborns

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  • Douglas Almond

    (Columbia University and National Bureau of Economic Research.)

  • Joseph J. Doyle, Jr.

    (MIT and National Bureau of Economic Research.)

  • Amanda E. Kowalski

    (Yale University and National Bureau of Economic Research.)

  • Heidi Williams

    (Harvard University.)

Abstract

A key policy question is whether the benefits of additional medical expenditures exceed their costs. We propose a new approach for estimating marginal returns to medical spending based on variation in medical inputs generated by diagnostic thresholds. Specifically, we combine regression discontinuity estimates that compare health outcomes and medical treatment provision for newborns on either side of the very low birth weight threshold at 1,500 grams. First, using data on the census of U.S. births in available years from 1983 to 2002, we find that newborns with birth weights just below 1,500 grams have lower one-year mortality rates than do newborns with birth weights just above this cutoff, even though mortality risk tends to decrease with birth weight. One-year mortality falls by approximately one percentage point as birth weight crosses 1,500 grams from above, which is large relative to mean infant mortality of 5.5% just above 1,500 grams. Second, using hospital discharge records for births in five states in available years from 1991 to 2006, we find that newborns with birth weights just below 1,500 grams have discontinuously higher charges and frequencies of specific medical inputs. Hospital costs increase by approximately $4,000 as birth weight crosses 1,500 grams from above, relative to mean hospital costs of $40,000 just above 1,500 grams. Under an assumption that observed medical spending fully captures the impact of the "very low birth weight" designation on mortality, our estimates suggest that the cost of saving a statistical life of a newborn with birth weight near 1,500 grams is on the order of $550,000 in 2006 dollars. (c) 2010 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology..

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Bibliographic Info

Article provided by MIT Press in its journal Quarterly Journal of Economics.

Volume (Year): 125 (2010)
Issue (Month): 2 (May)
Pages: 591-634

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Handle: RePEc:tpr:qjecon:v:125:y:2010:i:2:p:591-634

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  1. Atsushi Inoue & Gary Solon, 2005. "Two-Sample Instrumental Variables Estimators," NBER Technical Working Papers 0311, National Bureau of Economic Research, Inc.
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  7. Guido Imbens & Thomas Lemieux, 2007. "Regression Discontinuity Designs: A Guide to Practice," NBER Working Papers 13039, National Bureau of Economic Research, Inc.
  8. McCrary, Justin, 2008. "Manipulation of the running variable in the regression discontinuity design: A density test," Journal of Econometrics, Elsevier, vol. 142(2), pages 698-714, February.
  9. Ludwig, Jens & Miller, Douglas L., 2006. "Does Head Start Improve Children's Life Chances? Evidence from a Regression Discontinuity Design," IZA Discussion Papers 2111, Institute for the Study of Labor (IZA).
  10. Daniel P. Kessler & Mark McClellan, 1996. "Do Doctors Practice Defensive Medicine?," NBER Working Papers 5466, National Bureau of Economic Research, Inc.
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  12. Douglas Almond & Joseph J. Doyle, Jr., 2008. "After Midnight: A Regression Discontinuity Design in Length of Postpartum Hospital Stays," NBER Working Papers 13877, National Bureau of Economic Research, Inc.
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Cited by:
  1. Prashant Bharadwaj & Katrine Vellesen L?ken & Christopher Neilson, 2013. "Early Life Health Interventions and Academic Achievement," American Economic Review, American Economic Association, vol. 103(5), pages 1862-91, August.
  2. Andreas Fuster & James Vickery, 2013. "Securitization and the fixed-rate mortgage," Staff Reports 594, Federal Reserve Bank of New York.
  3. Adhvaryu, Achyuta & Nyshadham, Anant, 2011. "Healthcare Choices, Information and Health Outcomes," Working Papers 88, Yale University, Department of Economics.
  4. Daysal, N. Meltem & Trandafir, Mircea & van Ewijk, Reyn, 2012. "Saving Lives at Birth: The Impact of Home Births on Infant Outcomes," IZA Discussion Papers 6879, Institute for the Study of Labor (IZA).
  5. Hendrik Jürges & Juliane Köberlein, 2014. "First do no harm. Then do not cheat: DRG upcoding in German neonatology," Schumpeter Discussion Papers SDP14001, Universitätsbibliothek Wuppertal, University Library.
  6. Kolstad, Jonathan T. & Kowalski, Amanda E., 2012. "The impact of health care reform on hospital and preventive care: Evidence from Massachusetts," Journal of Public Economics, Elsevier, vol. 96(11), pages 909-929.
  7. Jason Hockenberry & Lorens Helmchen, 2014. "The Nature of Surgeon Human Capital Depreciation," NBER Working Papers 20017, National Bureau of Economic Research, Inc.
  8. Fe, Eduardo, 2012. "Efficient estimation in regression discontinuity designs via asymmetric kernels," MPRA Paper 38164, University Library of Munich, Germany.
  9. Amitabh Chandra & Anupam B. Jena & Jonathan S. Skinner, 2011. "The Pragmatist's Guide to Comparative Effectiveness Research," Journal of Economic Perspectives, American Economic Association, vol. 25(2), pages 27-46, Spring.
  10. Will Dobbie & Roland G. Fryer, Jr, 2011. "The Impact of Youth Service on Future Outcomes: Evidence from Teach For America," NBER Working Papers 17402, National Bureau of Economic Research, Inc.
  11. Alan I. Barreca & Jason M. Lindo & Glen R. Waddell, 2011. "Heaping-Induced Bias in Regression-Discontinuity Designs," NBER Working Papers 17408, National Bureau of Economic Research, Inc.
  12. Daysal, N. Meltem & Trandafir, Mircea & van Ewijk, Reyn, 2013. "Returns to Childbirth Technologies: Evidence from Preterm Births," IZA Discussion Papers 7834, Institute for the Study of Labor (IZA).

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