IDEAS home Printed from https://ideas.repec.org/h/nbr/nberch/7634.html
   My bibliography  Save this book chapter

Pricing Heart Attack Treatments

In: Medical Care Output and Productivity

Author

Listed:
  • David M. Cutler
  • Mark B. McClellan
  • Joseph P. Newhouse
  • Dahlia K. Remler

Abstract

In this paper, we estimate price indices for heart attack treatments, demonstrating the techniques that are currently used in official price indices and presenting some alternatives. We consider two types of price indices, a Service Price Index, which prices specific treatments provided, and a Cost of Living Index, which prices the health outcomes of patients. Both indices are complicated by price measurement issues: list prices and transactions prices are fundamentally different in the medical care field. The development of new or modified medical treatments further complicates the comparison of like' goods over time. And the Cost of Living Index is hampered by the need to determine how much of health improvement results from medical treatments in comparison to other factors. We describe methods to address each of these obstacles. We conclude that whereas traditional price indices when applied to heart attack treatments are rising at roughly 3 percent per year above general inflation, a corrected service price index is rising at perhaps 1 to 2 percent per year above general inflation, and the cost of living index is falling by 1 to 2 percent per year relative to general inflation. We discuss the implications of these results for official price index calculations.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • David M. Cutler & Mark B. McClellan & Joseph P. Newhouse & Dahlia K. Remler, 2001. "Pricing Heart Attack Treatments," NBER Chapters, in: Medical Care Output and Productivity, pages 305-362, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:7634
    as

    Download full text from publisher

    File URL: http://www.nber.org/chapters/c7634.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Franklin M. Fisher & Zvi Griliches, 1995. "Aggregate Price Indices, New Goods, and Generics," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(1), pages 229-244.
    2. Fisher, Franklin M. & Shell, Karl, 1972. "The Economic Theory of Price Indices," Elsevier Monographs, Elsevier, edition 1, number 9780122577505 edited by Shell, Karl.
    3. Zvi Griliches, 1992. "Output Measurement in the Service Sectors," NBER Books, National Bureau of Economic Research, Inc, number gril92-1, March.
    4. Paul A. Armknecht & Daniel H. Ginsburg, 1992. "Improvements in Measuring Price Changes in Consumer Services: Past, Present, and Future," NBER Chapters, in: Output Measurement in the Service Sectors, pages 109-157, National Bureau of Economic Research, Inc.
    5. David M. Cutler & Mark McClellan & Joseph P. Newhouse & Dahlia Remler, 1998. "Are Medical Prices Declining? Evidence from Heart Attack Treatments," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 991-1024.
    6. Frank, Richard G & Busch, Susan H & Berndt, Ernst R, 1998. "Measuring Prices and Quantities of Treatment for Depression," American Economic Review, American Economic Association, vol. 88(2), pages 106-111, May.
    7. Berndt, Ernst R. & Fuss, Melvyn A., 1986. "Productivity measurement with adjustments for variations in capacity utilization and other forms of temporary equilibrium," Journal of Econometrics, Elsevier, vol. 33(1-2), pages 7-29.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. Katharine G. Abraham, 2014. "Expanded Measurement of Economic Activity: Progress and Prospects," NBER Chapters, in: Measuring Economic Sustainability and Progress, pages 25-42, National Bureau of Economic Research, Inc.
    2. David E. Lebow & Jeremy B. Rudd, 2003. "Measurement Error in the Consumer Price Index: Where Do We Stand?," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 159-201, March.
    3. Joseph P. Newhouse, 2001. "Medical Care Price Indices: Problems and Opportunities / The Chung-Hua Lectures," NBER Working Papers 8168, National Bureau of Economic Research, Inc.
    4. Driouchi, Ahmed, 2015. "New Health Technologies and Health Workforce in Developing Economies," MPRA Paper 67775, University Library of Munich, Germany.
    5. Ralph Kozlow, 2000. "International Accounts Data Needs: Plans, Progress, and Priorities," BEA Papers 0009, Bureau of Economic Analysis.
    6. David E. Lebow & Jeremy B. Rudd, 2001. "Measurement error in the consumer price index: where do we stand?," Finance and Economics Discussion Series 2001-61, Board of Governors of the Federal Reserve System (U.S.).
    7. Adriana Castelli & Peter C Smith, 2006. "Circulatory Disease in the NHS: Measuring Trends in Hospital Costs and Output," Working Papers 021cherp, Centre for Health Economics, University of York.
    8. Aizcorbe, Ana & Nestoriak, Nicole, 2011. "Changing mix of medical care services: Stylized facts and implications for price indexes," Journal of Health Economics, Elsevier, vol. 30(3), pages 568-574, May.
    9. Andrew Sharpe & Celeste Bradley & Hans Messinger, 2007. "The Measurement of Output and Productivity in the Health Care Sector in Canada: An Overview," CSLS Research Reports 2007-06, Centre for the Study of Living Standards.
    10. Jill R. Horwitz, 2005. "Does Corporate Ownership Matter? Service Provision in the Hospital Industry," NBER Working Papers 11376, National Bureau of Economic Research, Inc.
    11. Anne E. Hall, 2015. "Adjusting the Measurement of the Output of the Medical Sector for Quality: A Review of the Literature," BEA Working Papers 0122, Bureau of Economic Analysis.
    12. Jonathan S. Skinner & Elliott S. Fisher & John Wennberg, 2005. "The Efficiency of Medicare," NBER Chapters, in: Analyses in the Economics of Aging, pages 129-160, National Bureau of Economic Research, Inc.
    13. Ernst R. Berndt & David M. Cutler & Richard Frank & Zvi Griliches & Joseph P. Newhouse & Jack E. Triplett, 2001. "Price Indexes for Medical Care Goods and Services -- An Overview of Measurement Issues," NBER Chapters, in: Medical Care Output and Productivity, pages 141-200, National Bureau of Economic Research, Inc.
    14. Carl A. Johnston & Interdisciplinary Center for Economic Science, 2006. "Agent-based Investigation of Price Inflation In Health Insurance," Computing in Economics and Finance 2006 155, Society for Computational Economics.
    15. Horwitz, Jill R. & Nichols, Austin, 2009. "Hospital ownership and medical services: Market mix, spillover effects, and nonprofit objectives," Journal of Health Economics, Elsevier, vol. 28(5), pages 924-937, September.
    16. Matthew D. Shapiro & Irving Shapiro & David W. Wilcox, 1999. "Quality Improvement in Health Care: A Framework for Price and Output Measurement," American Economic Review, American Economic Association, vol. 89(2), pages 333-337, May.
    17. Tina Highfill & Elizabeth Bernstein, 2019. "Using disability adjusted life years to value the treatment of thirty chronic conditions in the U.S. from 1987 to 2010: a proof of concept," International Journal of Health Economics and Management, Springer, vol. 19(3), pages 449-466, December.
    18. Diane Dawson & Hugh Gravelle & Mary O'Mahony & Andrew Street & Martin Weale & Adriana Castelli & Rowena Jacobs & Paul Kind & Pete Loveridge & Stephen Martin & Philip Stevens & Lucy Stokes, 2005. "Developing new approaches to measuring NHS outputs and productivity," Working Papers 006cherp, Centre for Health Economics, University of York, revised Dec 2005.
    19. Marco A. Castaneda & Meryem Saygili, 2021. "The effects of health insurance on the choice of medical procedures: Evidence from heart attacks and childbirths," International Journal of Health Planning and Management, Wiley Blackwell, vol. 36(5), pages 1626-1652, September.
    20. Robert J. Gordon, 2000. "The Boskin Commission Report and its Aftermath," NBER Working Papers 7759, National Bureau of Economic Research, Inc.
    21. 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).
    22. Jill R. Horwitz & Austin Nichols, 2007. "What Do Nonprofits Maximize? Nonprofit Hospital Service Provision and Market Ownership Mix," NBER Working Papers 13246, National Bureau of Economic Research, Inc.
    23. Kate Ho & Ariel Pakes & Mark Shepard, 2018. "The Evolution of Health Insurer Costs in Massachusetts, 2010–2012," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 53(1), pages 117-137, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ernst R. Berndt & David M. Cutler & Richard Frank & Zvi Griliches & Joseph P. Newhouse & Jack E. Triplett, 2001. "Price Indexes for Medical Care Goods and Services -- An Overview of Measurement Issues," NBER Chapters, in: Medical Care Output and Productivity, pages 141-200, National Bureau of Economic Research, Inc.
    2. Leonard I. Nakamura, 2010. "Intangible Assets And National Income Accounting," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(s1), pages 135-155, June.
    3. Hoffmann, Johannes, 1998. "Problems of inflation measurement in Germany," Discussion Paper Series 1: Economic Studies 1998,01e, Deutsche Bundesbank.
    4. Jack E. Triplett, 2001. "What's Different about Health? Human Repair and Car Repair in National Accounts and in National Health Accounts," NBER Chapters, in: Medical Care Output and Productivity, pages 15-96, National Bureau of Economic Research, Inc.
    5. Leonard I. Nakamura, 2009. "Intangible assets and national income accounting: measuring a scientific revolution," Working Papers 09-11, Federal Reserve Bank of Philadelphia.
    6. Banzhaf, H. Spencer, 2002. "Quality Adjustment for Spatially-Delineated Public Goods: Theory and Application to Cost-of-Living Indices in Los Angeles," RFF Working Paper Series dp-02-10-, Resources for the Future.
    7. Robert F. Graboyes, 1994. "Medical care prices indexes," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 69-89.
    8. Prior, Diego, 2003. "Long- and short-run non-parametric cost frontier efficiency: An application to Spanish savings banks," Journal of Banking & Finance, Elsevier, vol. 27(4), pages 655-671, April.
    9. Hoffmann, Johannes, 1998. "Probleme der Inflationsmessung in Deutschland," Discussion Paper Series 1: Economic Studies 1998,01, Deutsche Bundesbank.
    10. Ernst R. Berndt & Susan H. Busch & Richard G. Frank, 1998. "Price Indexes for Acute Phase Treatment of Depression," NBER Working Papers 6799, National Bureau of Economic Research, Inc.
    11. Charles R. Hulten, 2009. "Growth Accounting," NBER Working Papers 15341, National Bureau of Economic Research, Inc.
    12. Wynne, Mark A & Sigalla, Fiona D, 1996. "A Survey of Measurement Biases in Price Indexes," Journal of Economic Surveys, Wiley Blackwell, vol. 10(1), pages 55-89, March.
    13. Hulten, Charles R., 2010. "Growth Accounting," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 2, chapter 0, pages 987-1031, Elsevier.
    14. Charles R. Hulten, 2006. "The "Architecture" of Capital Accounting: Basic Design Principles," NBER Chapters, in: A New Architecture for the US National Accounts, pages 193-214, National Bureau of Economic Research, Inc.
    15. 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).
    16. David M. Cutler & Mark McClellan & Joseph P. Newhouse & Dahlia Remler, 1996. "Are Medical Prices Declining?," NBER Working Papers 5750, National Bureau of Economic Research, Inc.
    17. Ana M. Aizcorbe & Jeff Chen, 2022. "Outlet Substitution Bias Estimates for Ride Sharing and Taxi Rides in New York City," BEA Working Papers 0192, Bureau of Economic Analysis.
    18. 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.
    19. J. David Cummins & Mary A. Weiss, 1998. "Analyzing Firm Performance in the Insurance Industry Using Frontier Efficiency Methods," Center for Financial Institutions Working Papers 98-22, Wharton School Center for Financial Institutions, University of Pennsylvania.
    20. Matthew D. Shapiro & David W. Wilcox, 1996. "Mismeasurement in the Consumer Price Index: An Evaluation," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 93-154, National Bureau of Economic Research, Inc.

    More about this item

    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:nbr:nberch:7634. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    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.