Medical Innovation and Health Disparities"

A long-standing question in health economics asks what drives heterogeneity in health investments across sociodemographic groups, which contribute to health disparities. We examine a novel source: variation by sociodemographic groups in the impact of medical treatment side effects. We estimate a lifecycle model of medication and labor supply decisions using data on men infected with human immunodeficiency virus (HIV) and with different levels of completed education. Agents in the model make dynamic medication and work choices as a function of expected income, health, and mortality. We also include utility costs of side effects, which can interact with the utility cost of work, and allow these parameters to vary by education. We use the estimated model to evaluate the disparate impacts of an effective HIV treatment innovation that had harsh side effects: HAART (which stands for highly active antiretroviral treatment). Measured in lifetime utility gains, HAART disproportionately benefited patients with more education in part due to differences in income and mortality, but also due to smaller impacts of side effects on labor supply. We also simulate the effects of a HAART treatment mandate, which mimics assignment to treatment in a clinical trial. The mandate improves health, which might be viewed as a success in a randomized trial. However, this masks the downsides of treatment, including lower labor supply due to side effects, especially for lower-education men. Broadly, viewing heterogeneity in health investments as solely a result of barriers to access is overly simplistic. Individually optimal investments in health may in part reflect the costs of managing side effects and work. If low health investments create negative externalities (e.g., due to increased use of publicly-funded healthcare), the benefits of policies that moderate resulting health-work tradeoffs could outweigh the costs. (Copyright: Elsevier)