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The Lifetime Costs and Benefits of Medical Technology

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  • David M. Cutler

Abstract

Measuring the lifetime costs and benefits of medical technologies is essential in evaluating technological change and determining the productivity of medical care. Using data on Medicare beneficiaries with a heart attack in the late 1980s and 17 years of follow up data, I evaluate the long-term costs and benefits of revascularization after a heart attack. I account for non-random selection into treatment with instrumental variables; following McClellan, McNeil, and Newhouse, the instrument is the differential distance to a hospital capable of providing revascularization. The results show that revascularization is associated with over 1 year of additional life expectancy, at a cost of about $40,000. Revascularization, or other treatments correlated with it, appears to be highly cost-effective.

Suggested Citation

  • David M. Cutler, 2007. "The Lifetime Costs and Benefits of Medical Technology," NBER Working Papers 13478, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:13478
    Note: AG EH
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    References listed on IDEAS

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    1. David Meltzer, 1997. "Accounting for Future Costs in Medical Cost-Effectiveness Analysis," NBER Working Papers 5946, National Bureau of Economic Research, Inc.
    2. McClellan, Mark & Newhouse, Joseph P., 1997. "The marginal cost-effectiveness of medical technology: A panel instrumental-variables approach," Journal of Econometrics, Elsevier, vol. 77(1), pages 39-64, March.
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    6. Meltzer, David, 1997. "Accounting for future costs in medical cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 16(1), pages 33-64, February.
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    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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