Medical Innovation and Health Disparities

Health-maximizing and welfare-maximizing behaviors can be at odds, especially among disadvantaged groups, which can contribute to health disparities. To investigate this point, we estimate a lifecycle model of medication and labor supply decisions using data on HIV-positive men. We use the model to evaluate the disparate consequences of an effective HIV treatment innovation that had harsh side effects: HAART. Measured in lifetime utility gains, HAART disproportionately benefited patients with more education. Lower-educated men were more likely to avoid HAART due to its side effects that interfered with work. To illustrate the wedge between health and welfare, we simulate the effects of a HAART treatment mandate, which mimics assignment to treatment in a clinical trial. The mandate improves health, which would be viewed as a success in a randomized trial. However, clinical trials, which often focus solely on health outcomes, can mask downsides of the treatment including its distributional consequences: the mandate increases inequality as measured by lifetime welfare because lower-educated men are more likely to stop working due to HAART-induced side effects. In contrast, a counterfactual policy simulation that provides a non-labor income subsidy increases HAART adoption and improves health, especially among lower-education individuals. Broadly, our study illustrates that the evaluation of medical innovations may be incomplete absent an understanding of their distributional consequences across different groups of patients.