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Technological Development and Medical Productivity: The Diffusion of Angioplasty in New York State

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  • Cutler, David
  • Huckman, Robert
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    Abstract

    A puzzling feature of many medical innovations is that they simultaneously appear to reduce unit costs and increase total costs. We consider this phenomenon by examining the diffusion of percutaneous transluminal coronary angioplasty (PTCA)—a treatment for coronary artery disease—over the past two decades. We find that growth in the use of PTCA led to higher total costs despite its lower unit cost. Over the two decades following PTCA’s introduction, however, we find that the magnitude of this increase was reduced by between 10 and 20% due to the substitution of PTCA for CABG. In addition, the increased use of PTCA appears to be a productivity improvement. PTCAs that substitute for CABG cost less and have the same or better outcomes, while PTCAs that replace medical management appear to improve health by enough to justify the cost.

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    File URL: http://dash.harvard.edu/bitstream/handle/1/2664291/cutler_techdev.pdf
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    Bibliographic Info

    Paper provided by Harvard University Department of Economics in its series Scholarly Articles with number 2664291.

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    Date of creation: 2003
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    Publication status: Published in Journal of Health Economics
    Handle: RePEc:hrv:faseco:2664291

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    1. Joseph P. Newhouse, 1992. "Medical Care Costs: How Much Welfare Loss?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 3-21, Summer.
    2. Wise, David A. (ed.), 1998. "Inquiries in the Economics of Aging," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226903033, April.
    3. David Meltzer & Jeanette Chung, 2001. "Effects of Competition under Prospective Payment on Hospital Costs among High and Low Cost Admissions: Evidence from California, 1983 - 1993," NBER Working Papers 8069, National Bureau of Economic Research, Inc.
    4. Mark McClellan & Douglas Staiger, 1999. "The Quality of Health Care Providers," NBER Working Papers 7327, National Bureau of Economic Research, Inc.
    5. Weisbrod, Burton A, 1991. "The Health Care Quadrilemma: An Essay on Technological Change, Insurance, Quality of Care, and Cost Containment," Journal of Economic Literature, American Economic Association, vol. 29(2), pages 523-52, June.
    6. Berndt, Ernst R. & Morrison, Catherine J., 1992. "High-tech capital formation and economic performance in U.S. manufacturing industries : an exploratory analysis," Working papers 3419-92., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    7. Viscusi, W Kip, 1993. "The Value of Risks to Life and Health," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1912-46, December.
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