The impact of biomedical innovation on the disability of elderly Medicare recipients, 2013–2019

We investigate the relationship across U.S. states between indicators of the growth in the quality of medical goods and services used by elderly Medicare enrollees and the growth or decline in their disability, during the period 2013-2019. Our indicators of quality are the utilization-weighted mean vintages of prescription drugs and of medical services and procedures. We control for person-level demographic characteristics (sex, age, race, education, marital status), state/year characteristics (Medicare spending per enrollee, per capita income, prevalence of chronic conditions), state fixed effects, and year fixed effects. Our estimates indicate that the numbers of 2019 beneficiaries with three types of disabilities—cognition, vision, and independent living difficulties—were each reduced by between 650 and 760 thousand by the 2013-2019 increase in drug vintage, and that the numbers of 2019 beneficiaries with self-care and ambulation difficulties were each reduced by about 1.1 million by the 2013-2019 increase in drug vintage. The 2013-2019 increase in drug vintage reduced the mean number of disabilities from 0.91 to 0.82—77% of the observed increase—and it reduced the total number of disabilities by 4.9 million. The incremental drug cost per reduced disability may have been $5555, which seems quite reasonable.