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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.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13478.

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Date of creation: Oct 2007
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Handle: RePEc:nbr:nberwo:13478

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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. Newey, W.K., 1989. "Efficient Instrumental Variables Estimation Of Nonlinear Models," Papers 341, Princeton, Department of Economics - Econometric Research Program.
  3. Robert S. Huckman & Gary P. Pisano, 2006. "The Firm Specificity of Individual Performance: Evidence from Cardiac Surgery," Management Science, INFORMS, vol. 52(4), pages 473-488, April.
  4. 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.
  5. 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.
  6. Garber, Alan M. & Phelps, Charles E., 1997. "Economic foundations of cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 16(1), pages 1-31, February.
  7. Meltzer, David, 1997. "Accounting for future costs in medical cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 16(1), pages 33-64, February.
  8. Amitabh Chandra & Douglas O. Staiger, 2007. "Productivity Spillovers in Health Care: Evidence from the Treatment of Heart Attacks," Journal of Political Economy, University of Chicago Press, vol. 115, pages 103-140.
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Cited by:
  1. Jack, William & Lewis, Maureen, 2009. "Health investments and economic growth : macroeconomic evidence and microeconomic foundations," Policy Research Working Paper Series 4877, The World Bank.
  2. de Meijer, Claudine & O’Donnell, Owen & Koopmanschap, Marc & van Doorslaer, Eddy, 2013. "Health expenditure growth: Looking beyond the average through decomposition of the full distribution," Journal of Health Economics, Elsevier, vol. 32(1), pages 88-105.
  3. Schreyögg, Jonas & Bäumler, Michael & Busse, Reinhard, 2009. "Balancing adoption and affordability of medical devices in Europe," Health Policy, Elsevier, vol. 92(2-3), pages 218-224, October.
  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. repec:dgr:uvatin:2012051 is not listed on IDEAS
  6. Michael Bäumler & Tom Stargardt & Jonas Schreyögg & Reinhard Busse, 2012. "Cost Effectiveness of Drug-Eluting Stents in Acute Myocardial Infarction Patients in Germany," Applied Health Economics and Health Policy, Springer, vol. 10(4), pages 235-248, July.
  7. Joshua Graff Zivin & Matthew Neidell, 2013. "Environment, Health, and Human Capital," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 689-730, September.
  8. Joseph J. Doyle, 2011. "Returns to Local-Area Health Care Spending: Evidence from Health Shocks to Patients Far from Home," American Economic Journal: Applied Economics, American Economic Association, vol. 3(3), pages 221-43, July.
  9. Juan Oliva-Moreno, 2012. "Loss of labour productivity caused by disease and health problems: what is the magnitude of its effect on Spain’s Economy?," The European Journal of Health Economics, Springer, vol. 13(5), pages 605-614, October.

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