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Technological development and medical productivity: the diffusion of angioplasty in New York state

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  • Cutler, David M.
  • Huckman, Robert S.

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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Suggested Citation

  • Cutler, David M. & Huckman, Robert S., 2003. "Technological development and medical productivity: the diffusion of angioplasty in New York state," Journal of Health Economics, Elsevier, vol. 22(2), pages 187-217, March.
  • Handle: RePEc:eee:jhecon:v:22:y:2003:i:2:p:187-217
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    References listed on IDEAS

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    1. David M. Cutler & Mark B. McClellan, 1998. "What Is Technological Change?," NBER Chapters,in: Inquiries in the Economics of Aging, pages 51-81 National Bureau of Economic Research, Inc.
    2. Viscusi, W Kip, 1993. "The Value of Risks to Life and Health," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1912-1946, December.
    3. Berndt, Ernst R. & Morrison, Catherine J., 1995. "High-tech capital formation and economic performance in U.S. manufacturing industries An exploratory analysis," Journal of Econometrics, Elsevier, vol. 65(1), pages 9-43, January.
    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. Mark McClellan & Douglas Staiger, 1999. "The Quality of Health Care Providers," NBER Working Papers 7327, National Bureau of Economic Research, Inc.
    6. David M. Cutler & Elizabeth Richardson, 1997. "Measuring the Health of the U.S. Population," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1997 Micr), pages 217-282.
    7. 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 523-552, June.
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    More about this item

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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