IDEAS home Printed from https://ideas.repec.org/a/ucp/amjhec/v4y2018i4p433-453.html

How Does Technological Change Affect Quality-Adjusted Prices in Health Care? Systematic Evidence from Thousands of Innovations

Author

Listed:
  • Kristopher J. Hult

    (Charles River Associates)

  • Sonia Jaffe

    (Department of Economics, University of Chicago Author email: spj@uchicago.edu)

  • Tomas J. Philipson

    (Becker Friedman Institute and Irving B. Harris Graduate School of Public Policy Studies, University of Chicago.)

Abstract

Medical innovations have improved treatment for many diseases but have simultaneously raised spending on health care. Many health economists believe that technological change is the major factor driving the growth of the health-care sector. Whether quality has increased as much as spending—that is, whether new innovations raise or lower quality-adjusted prices in health care—is a central question for both positive and normative health-care analysis. We do a systematic analysis of the impact of technological change on quality-adjusted prices, with over 6,000 comparisons between innovations and incumbent technologies. We observe each innovation's price and quality, as well as the price and quality of an incumbent technology treating the same disease. We find that the innovations' quality-adjusted prices are higher than the incumbents' for about two-thirds of innovations. Nevertheless, we argue that quality-adjusted prices may fall or rise over time depending on the effect of competition on incumbents' prices over time. A 4-percent price decline due to competition would offset the cross-sectional price difference for a majority of indications. We discuss the conditions particular to health care that may cause increases in quality-adjusted prices over time rather than decreases as experienced in many other industries.

Suggested Citation

  • Kristopher J. Hult & Sonia Jaffe & Tomas J. Philipson, 2018. "How Does Technological Change Affect Quality-Adjusted Prices in Health Care? Systematic Evidence from Thousands of Innovations," American Journal of Health Economics, University of Chicago Press, vol. 4(4), pages 433-453, Fall.
    • Handle: RePEc:ucp:amjhec:v:4:y:2018:i:4:p:433-453
    as

    Download full text from publisher

    File URL: https://www.journals.uchicago.edu/doi/pdf/10.1162/ajhe_a_00109
    Download Restriction: Access to PDF is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ivan Frankovic & Michael Kuhn & Stefan Wrzaczek, 2020. "On the Anatomy of Medical Progress Within an Overlapping Generations Economy," De Economist, Springer, vol. 168(2), pages 215-257, June.
    2. Frankovic, Ivan & Kuhn, Michael, 2023. "Health insurance, endogenous medical progress, health expenditure growth, and welfare," Journal of Health Economics, Elsevier, vol. 87(C).
    3. Elio Borgonovi & Paola Adinolfi & Rocco Palumbo & Gabriella Piscopo, 2018. "Framing the Shades of Sustainability in Health Care: Pitfalls and Perspectives from Western EU Countries," Sustainability, MDPI, vol. 10(12), pages 1-20, November.
    4. Karen Eggleston & Brian K. Chen & Chih-Hung Chen & Ying Isabel Chen & Talitha Feenstra & Toshiaki Iizuka & Janet Tin Kei Lam & Gabriel M. Leung & Jui-fen Rachel Lu & Beatriz Rodriguez-Sanchez & Jeroen, 2020. "Are quality-adjusted medical prices declining for chronic disease? Evidence from diabetes care in four health systems," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 21(5), pages 689-702, July.
    5. Seidu Dauda & Abe C. Dunn & Anne E. Hall, 2019. "Are Medical Care Prices Still Declining? A Systematic Examination of Quality-Adjusted Price Index Alternatives for Medical Care," BEA Working Papers 0166, Bureau of Economic Analysis.
    6. Dauda, Seidu & Dunn, Abe & Hall, Anne, 2022. "A systematic examination of quality-adjusted price index alternatives for medical care using claims data," Journal of Health Economics, Elsevier, vol. 85(C).
    7. 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.

    More about this item

    Keywords

    ;
    ;

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucp:amjhec:v:4:y:2018:i:4:p:433-453. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Journals Division (email available below). General contact details of provider: https://www.journals.uchicago.edu/AJHE .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.