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The “Weisbrod Quadrilemma” Revisited: Insurance Incentives on New Health Technologies

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  • Joan Costa-Font

    (London School of Economics and Political Science, Houghton Street, London WC2A 2AE, U.K. E-mails: j.costa-font@lse.ac.uk; a.j.mcguire@lse.ac.uk)

  • Alistair McGuire

    (London School of Economics and Political Science, Houghton Street, London WC2A 2AE, U.K. E-mails: j.costa-font@lse.ac.uk; a.j.mcguire@lse.ac.uk)

  • Victoria Serra-Sastre

    () (Economics Department, City University, Northampton Square, London EC1V 0HB, U.K.)

Abstract

The effect of insurance expansion on the diffusion of new technologies is not a well-understood phenomenon. Arguably, an expansion of insurance coverage provides a motivation for R&D investment in medical technologies. Although risk pooling through insurance gives rise to greater affordability for existing treatments and becomes a volume driver of new treatments, it may also influence provider reimbursement through a monopsony purchaser effect and related cost control measures. However, the impact that insurance has on technology availability and R&D investment, and more generally on the adoption of new technologies, remains an unexplored empirical question. This paper presents evidence of a link between insurance and technology diffusion using OECD panel data and taking advantage of a dynamic specification structure. Our empirical estimates indicate that higher degrees of private expenditure on health care correlate with higher levels of R&D in health care, consistent with the hypothesis forwarded by Weisbrod that increasing insurance coverage boosts technology adoption. However, our findings also suggest that increasing public funding of health care appears to lower technological adoption, which is, of course, consistent with the exercising of monopsony power and an objective of cost containment.

Suggested Citation

  • Joan Costa-Font & Alistair McGuire & Victoria Serra-Sastre, 2012. "The “Weisbrod Quadrilemma” Revisited: Insurance Incentives on New Health Technologies," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 37(4), pages 678-695, October.
  • Handle: RePEc:pal:gpprii:v:37:y:2012:i:4:p:678-695
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    Cited by:

    1. Yang, Jinqiu & Hong, Yongmiao & Ma, Shuangge, 2016. "Impact of the new health care reform on hospital expenditure in China: A case study from a pilot city," China Economic Review, Elsevier, vol. 39(C), pages 1-14.
    2. Varabyova, Yauheniya & Blankart, Carl Rudolf & Greer, Ann Lennarson & Schreyögg, Jonas, 2017. "The determinants of medical technology adoption in different decisional systems: A systematic literature review," Health Policy, Elsevier, vol. 121(3), pages 230-242.

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