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Medical Care Price Indices: Problems and Opportunities / The Chung-Hua Lectures

  • Joseph P. Newhouse

These Chung-Hua Lectures, given at the Academia Sinica in Taiwan in December 2000, summarize work that has been done by myself and others on biases in medical care price indices. I begin by reviewing various uses of price indices and therefore why biases in the overall indices - and changes in those biases - matter. I then describe briefly the assumptions and theory underlying the official price indices. I next turn to the problems of measuring medical prices, assuming the basic applicability of the theory upon which the official indices are based. Finally I take up the potential inapplicability of the assumptions made by that theory and the resulting issues for measuring medical price changes. I describe an alternative theory and its implications for the measurement of medical prices. I conclude that the biases in the official medical care index, while substantially reduced by recent improvements, likely remain substantial enough to affect the overall official indices in the United States, especially the GDP deflator, where the weight of medical care is around 13 percent.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8168.

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Date of creation: Mar 2001
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Handle: RePEc:nbr:nberwo:8168
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  1. William D. Nordhaus, 1998. "Quality Change in Price Indexes," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 59-68, Winter.
  2. Robert J. Gordon, 2000. "Does the "New Economy" Measure Up to the Great Inventions of the Past?," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 49-74, Fall.
  3. Berndt, Ernst R & Griliches, Zvi & Rosett, Joshua G, 1993. "Auditing the Producer Price Index: Micro Evidence from Prescription Pharamceutical Preparations," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(3), pages 251-64, July.
  4. Zvi Griliches & Iain Cockburn, 1993. "Generics and New Goods in Pharmaceutical Price Indexes," NBER Working Papers 4272, National Bureau of Economic Research, Inc.
  5. Baumol, William J, 1993. "Health Care, Education and the Cost Disease: A Looming Crisis for Public Choice," Public Choice, Springer, vol. 77(1), pages 17-28, September.
  6. 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.
  7. Joseph P. Newhouse, 1996. "Reimbursing Health Plans and Health Providers: Efficiency in Production versus Selection," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1236-1263, September.
  8. Zweifel, Peter & Manning, Willard G., 2000. "Moral hazard and consumer incentives in health care," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 8, pages 409-459 Elsevier.
  9. Lester C. Thurow, 1984. "The Need For Industrial Policies The Case of The U.S.A," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 55(1), pages 3-32, 01.
  10. Jensen, Gail A & Morrisey, Michael A, 1990. "Group Health Insurance: A Hedonic Price Approach," The Review of Economics and Statistics, MIT Press, vol. 72(1), pages 38-44, February.
  11. Jerry Hausman, 1997. "Cellular Telephone, New Products and the CPI," NBER Working Papers 5982, National Bureau of Economic Research, Inc.
  12. Summers, Lawrence H, 1989. "Some Simple Economics of Mandated Benefits," American Economic Review, American Economic Association, vol. 79(2), pages 177-83, May.
  13. Joseph P. Newhouse, 1992. "Medical Care Costs: How Much Welfare Loss?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 3-21, Summer.
  14. Hurley, Jeremiah, 2000. "An overview of the normative economics of the health sector," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 2, pages 55-118 Elsevier.
  15. Viscusi, W Kip, 1993. "The Value of Risks to Life and Health," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1912-46, December.
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