Increased health care spending has been argued to be largely due to technological change. Cost-effectiveness analysis is the main tool used by private and public third-party payers to prioritize adoption of the new technologies responsible for this growth. However, such analysis by payers...

Economists think of medical innovation as a valuable but risky good, producing health benefits but increasing financial risk. This perspective overlooks how innovation can lower physical risks borne by healthy patients facing the prospect of future disease. We present an alternative framework...

This paper studies the interactions between health insurance and the incentives for innovation. Although we focus on pharmaceutical innovation, our discussion applies to other industries producing novel technologies for sale in markets with subsidized demand. Standard results in the growth and...

The entry of married women into the labor force is one of the most notable economic phenomena of the twentieth century. We argue that medical progress played a critical role in this process. Improved maternal health alleviated the adverse effects of pregnancy and childbirth on women's ability to...

A puzzling feature of many medical innovations is that they simultaneously appear to reduce unit costs and increase total costs. We consider this phenomenon by examining the diffusion of percutaneous transluminal coronary angioplasty (PTCA) -- a treatment for coronary artery disease -- over the...

The pricing of medical products and services in the U.S. is notoriously complex. In health care, supply prices (those received by the manufacturer) are distinct from demand prices (those paid by the patient) due to health insurance. The insurer, in designing the benefit, decides what prices...

This study examines the long term impact of Medicare payment reductions on patient outcomes using a natural experiment - the Balance Budget Act (BBA) of 1997. We use predicted Medicare revenue changes due to BBA, with simulated BBA payment cuts as an instrument, to categorize hospitals by...

An extensive literature has documented a robust correlation between socioeconomic status--measured in a variety of ways--and health outcomes; however, much uncertainty remains regarding what causal processes underlie this association. The present paper builds on a growing literature that seeks...

Whether personal income tax deductions are appropriate refinements to the concept of income or unwarranted tax expenditures continues to be the subject of debate. The casualty loss and medical expense deductions are frequently justified on the ground that ability to pay is reduced by largely...

This paper investigates consumer switching costs in the context of health insurance markets, where adverse selection is a potential concern. Though previous work has studied these phenomena in isolation, they interact in a way that directly impacts market outcomes and consumer welfare. Our...