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The Efficiency of Medicare

In: Analyses in the Economics of Aging

Author

Listed:
  • Jonathan S. Skinner
  • Elliott S. Fisher
  • John Wennberg

Abstract

Technological advances in health care have been shown to yield large average health benefits for the U.S. elderly population. However, less is known about the marginal or incremental benefits of health care spending. We use geographical variations in health care spending to measure the marginal value of greater health care intensity among the elderly Medicare population. To correct for the reverse causation problem -- that sicker areas tend to require more health care -- we use regional averages of physician visits in the last six months of life as a natural randomization for health care intensity. Using linear and semiparametric instrumental variables, we find that a large component of Medicare expenditures -- $26 billion in 1996 dollars, or nearly 20 percent of total Medicare expenditures -- appears to provide no benefit in terms of survival, nor is it likely that this extra spending improves the quality of life. While secular trends in health care technology have delivered large health benefits, variation in health care intensity at a point in time have not.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Jonathan S. Skinner & Elliott S. Fisher & John Wennberg, 2005. "The Efficiency of Medicare," NBER Chapters, in: Analyses in the Economics of Aging, pages 129-160, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:10359
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    References listed on IDEAS

    as
    1. Angus S. Deaton & Christina Paxson, 2001. "Mortality, Education, Income, and Inequality among American Cohorts," NBER Chapters, in: Themes in the Economics of Aging, pages 129-170, National Bureau of Economic Research, Inc.
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    6. David M. Cutler, 2000. "Walking the Tightrope on Medicare Reform," Journal of Economic Perspectives, American Economic Association, vol. 14(2), pages 45-56, Spring.
    7. Skinner Jonathan & Wennberg John E., 2000. "Regional Inequality in Medicare Spending: The Key to Medicare Reform?," Forum for Health Economics & Policy, De Gruyter, vol. 3(1), pages 1-24, January.
    8. Currie, Janet & Gruber, Jonathan, 1996. "Saving Babies: The Efficacy and Cost of Recent Changes in the Medicaid Eligibility of Pregnant Women," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1263-1296, December.
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    11. Victor R. Fuchs & Mark B. McClellan & Jonathan S. Skinner, 2004. "Area Differences in Utilization of Medical Care and Mortality among US Elderly," NBER Chapters, in: Perspectives on the Economics of Aging, pages 367-414, National Bureau of Economic Research, Inc.
    12. David M. Cutler & Mark B. McClellan & Joseph P. Newhouse & Dahlia K. Remler, 2001. "Pricing Heart Attack Treatments," NBER Chapters, in: Medical Care Output and Productivity, pages 305-362, National Bureau of Economic Research, Inc.
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    16. Angrist, Joshua D, 1990. "Lifetime Earnings and the Vietnam Era Draft Lottery: Evidence from Social Security Administrative Records: Errata," American Economic Review, American Economic Association, vol. 80(5), pages 1284-1286, December.
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    More about this item

    JEL classification:

    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • I1 - Health, Education, and Welfare - - Health

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