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Are Quality-Adjusted Medical Prices Declining for Chronic Disease? Evidence from Diabetes Care in Four Health Systems

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Listed:
  • Karen Eggleston
  • Brian K. Chen
  • Chih-Hung Chen
  • Ying Isabel Chen
  • Talitha Feenstra
  • Toshiaki Iizuka
  • Janet Tinkei Lam
  • Gabriel M. Leung
  • Jui-fen Rachel Lu
  • Beatriz Rodriguez-Sanchez
  • Jeroen N. Struijs
  • Jianchao Quan
  • Joseph P. Newhouse

Abstract

Improvements in medical treatment have contributed to rising health spending. Yet there is relatively little evidence on whether the spending increase is “worth it” in the sense of producing better health outcomes of commensurate value—a critical question for understanding productivity in the health sector and, as that sector grows, for deriving an accurate quality-adjusted price index for an entire economy. We analyze individual-level panel data on medical spending and health outcomes for 123,548 patients with type 2 diabetes in four health systems. Using a “cost-of-living” method that measures value based on improved survival, we find a positive net value of diabetes care: the value of improved survival outweighs the added costs of care in each of the four health systems. This finding is robust to accounting for selective survival, end-of-life spending, and a range of values for a life-year or, equivalently, to attributing only a fraction of survival improvements to medical care.

Suggested Citation

  • Karen Eggleston & Brian K. Chen & Chih-Hung Chen & Ying Isabel Chen & Talitha Feenstra & Toshiaki Iizuka & Janet Tinkei Lam & Gabriel M. Leung & Jui-fen Rachel Lu & Beatriz Rodriguez-Sanchez & Jeroen , 2019. "Are Quality-Adjusted Medical Prices Declining for Chronic Disease? Evidence from Diabetes Care in Four Health Systems," NBER Working Papers 25971, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:25971
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    Cited by:

    1. Abe C. Dunn & Lasanthi Fernando & Eli Liebman, 2023. "A Direct Measure of Medical Innovation on Health Care Spending: A Condition-Specific Approach," BEA Papers 0121, Bureau of Economic Analysis.
    2. Jui-fen Rachel Lu & Ying Isabel Chen & Karen Eggleston & Chih-Hung Chen & Brian Chen, 2023. "Assessing Taiwan’s pay-for-performance program for diabetes care: a cost–benefit net value approach," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 24(5), pages 717-733, July.
    3. Abe Dunn & Anne Hall & Seidu Dauda, 2022. "Are Medical Care Prices Still Declining? A Re‐Examination Based on Cost‐Effectiveness Studies," Econometrica, Econometric Society, vol. 90(2), pages 859-886, March.

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    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I10 - Health, Education, and Welfare - - Health - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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