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A Direct Measure of Medical Innovation on Health Care Spending: A Condition-Specific Approach

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  • Abe C. Dunn
  • Lasanthi Fernando
  • Eli Liebman

Abstract

While technological innovation is believed to be a key driver of spending growth, measuring this relationship is challenging. We address this challenge using a large database of cost-effectiveness studies, which we use to develop proxy measures of inno- vation for specific conditions. We connect to data on spending growth at the condition level from the Bureau of Economic Analysis (BEA) Health Care Satellite Account (HCSA). We find our proxy for innovation is significantly related to spending growth, even after accounting for a number of factors. We estimate that about 18 percent of real spending growth per capita is explained by our proxy for innovation, which we argue is likely a lower bound for the actual contribution of technology on spending growth.

Suggested Citation

  • Abe C. Dunn & Lasanthi Fernando & Eli Liebman, 2023. "A Direct Measure of Medical Innovation on Health Care Spending: A Condition-Specific Approach," BEA Papers 0121, Bureau of Economic Analysis.
    • Handle: RePEc:bea:papers:0121
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    References listed on IDEAS

    as
    1. John A. Romley & Abe Dunn & Dana Goldman & Neeraj Sood, 2020. "Quantifying Productivity Growth in the Delivery of Important Episodes of Care within the Medicare Program Using Insurance Claims and Administrative Data," NBER Chapters, in: Big Data for Twenty-First-Century Economic Statistics, pages 297-338, National Bureau of Economic Research, Inc.
    2. 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).
    3. Amitabh Chandra & Jonathan Holmes & Jonathan Skinner, 2013. "Is This Time Different? The Slowdown in Healthcare Spending," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 44(2 (Fall)), pages 261-323.
    4. Hemphill, C. Scott & Sampat, Bhaven N., 2012. "Evergreening, patent challenges, and effective market life in pharmaceuticals," Journal of Health Economics, Elsevier, vol. 31(2), pages 327-339.
    5. Abe Dunn & Bryn Whitmire & Andrea Batch & Lasanthi Fernando & Lindsey Rittmueller, 2018. "High Spending Growth Rates For Key Diseases In 2000-14 Were Driven By Technology And Demographic Factors," BEA Working Papers 0153, Bureau of Economic Analysis.
    6. Sheila D. Smith & Joseph P. Newhouse & Gigi A. Cuckler, 2022. "Health Care Spending Growth Has Slowed: Will the Bend in the Curve Continue?," NBER Working Papers 30782, National Bureau of Economic Research, Inc.
    7. David M. Cutler & Kaushik Ghosh & Kassandra L. Messer & Trivellore Raghunathan & Allison B. Rosen & Susan T. Stewart, 2022. "A Satellite Account for Health in the United States," American Economic Review, American Economic Association, vol. 112(2), pages 494-533, February.
    8. Karen Eggleston & Brian K. Chen & Chih-Hung Chen & Ying Isabel Chen & Talitha Feenstra & Toshiaki Iizuka & Janet Tin Kei Lam & Gabriel M. Leung & Jui-fen Rachel Lu & Beatriz Rodriguez-Sanchez & Jeroen, 2020. "Are quality-adjusted medical prices declining for chronic disease? Evidence from diabetes care in four health systems," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 21(5), pages 689-702, July.
    9. Toon van der Gronde & Carin A Uyl-de Groot & Toine Pieters, 2017. "Addressing the challenge of high-priced prescription drugs in the era of precision medicine: A systematic review of drug life cycles, therapeutic drug markets and regulatory frameworks," PLOS ONE, Public Library of Science, vol. 12(8), pages 1-34, August.
    10. Abe Dunn & Anne Hall & Seidu Dauda, 2022. "Are Medical Care Prices Still Declining? A Re‐Examination Based on Cost‐Effectiveness Studies," Econometrica, Econometric Society, vol. 90(2), pages 859-886, March.
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    More about this item

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • I10 - Health, Education, and Welfare - - Health - - - General
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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