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The Effect of U.S. Health Insurance Expansions on Medical Innovation

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  • Jeffrey Clemens

Abstract

I study the channels through which health insurance influences medical innovation. Following Medicare and Medicaid's passage, I find that U.S.-based medical-equipment patenting rose by 40 to 50 percent relative to both other U.S. patenting and foreign medical-equipment patenting. Within the United States, increases in medical-equipment patenting were most dramatic in states where the Great Society insurance expansions were largest and in which there were large baseline numbers of physicians per resident. Consistent with historical case studies, Medical innovation's determinants extend beyond the potential revenues associated with global market size; a physician driven process of innovation-while-doing appears to play a central role. An extrapolation of the evidence suggests that the last half century's U.S. insurance expansions have driven 25 percent of recent global medical-equipment innovation. In a standard decomposition of health spending growth, this insurance-induced innovation accounts for 15 percent of the long run rise in U.S. health spending in hospitals, physicians' offices, and other clinical settings.

Suggested Citation

  • Jeffrey Clemens, 2013. "The Effect of U.S. Health Insurance Expansions on Medical Innovation," NBER Working Papers 19761, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:19761
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    Cited by:

    1. Johanna Catherine Maclean & Ioana Popovici & Elisheva Stern, 2015. "Health Insurance Expansions and Provider Behavior: Evidence from Substance Use Disorder Providers," DETU Working Papers 1510, Department of Economics, Temple University.
    2. Freedman, Seth & Lin, Haizhen & Simon, Kosali, 2015. "Public health insurance expansions and hospital technology adoption," Journal of Public Economics, Elsevier, vol. 121(C), pages 117-131.
    3. Jeffrey Clemens & Stan Veuger, 2015. "Risks to the Returns to Medical Innovation: The Case of Myriad Genetics," NBER Working Papers 21469, National Bureau of Economic Research, Inc.
    4. repec:bla:coecpo:v:35:y:2017:i:2:p:345-357 is not listed on IDEAS
    5. Clemens, Jeffrey, 2014. "Implications of Physician Ethics, Billing Norms, and Service Cost Structures for Medicare's Fee Schedule," MPRA Paper 73392, University Library of Munich, Germany.
    6. Dunn, Abe & Shapiro, Adam Hale, 2015. "Physician payments under health care reform," Journal of Health Economics, Elsevier, vol. 39(C), pages 89-105.
    7. Jeffrey Clemens & Joshua D. Gottlieb, 2017. "In the Shadow of a Giant: Medicare’s Influence on Private Physician Payments," Journal of Political Economy, University of Chicago Press, vol. 125(1), pages 1-39.
    8. Charles I. Jones, 2016. "Life and Growth," Journal of Political Economy, University of Chicago Press, vol. 124(2), pages 539-578.
    9. Galasso, Alberto & Luo, Hong, 2016. "Tort Reform and Innovation," CEPR Discussion Papers 11358, C.E.P.R. Discussion Papers.
    10. Lakdawalla, Darius & Malani, Anup & Reif, Julian, 2017. "The insurance value of medical innovation," Journal of Public Economics, Elsevier, vol. 145(C), pages 94-102.
    11. Jeffrey Clemens & Joshua D. Gottlieb, 2014. "Do Physicians' Financial Incentives Affect Medical Treatment and Patient Health?," American Economic Review, American Economic Association, vol. 104(4), pages 1320-1349, April.
    12. Kristopher J. Hult & Tomas J. Philipson, 2012. "Public Liabilities and Health Care Policy," NBER Working Papers 18571, National Bureau of Economic Research, Inc.
    13. Alberto Galasso & Hong Luo, 2016. "Tort Reform and Innovation," NBER Working Papers 22712, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • I1 - Health, Education, and Welfare - - Health
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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