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Are Medical Prices Declining? Evidence from Heart Attack Treatments

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

Abstract

We address long-standing problems in measuring medical inflation by estimating two types of price indices. The first, a Service Price Index, prices specific medical services, as does the current CPI. The second, a Cost of Living Index, measures a quality-adjusted cost of treating a health problem. We apply these indices to heart attack treatment between 1983 and 1994. More frequent reweighting and accounting for price discounts lowers the measured price change for heart attacks by three percentage points annually. Accounting for quality change lowers it further; we estimate that the real Cost of Living Index fell about 1 percent annually.

Suggested Citation

  • 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.
    • Handle: RePEc:oup:qjecon:v:113:y:1998:i:4:p:991-1024.
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    File URL: http://hdl.handle.net/10.1162/003355398555801
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