Is technological change in medicine worth it?

Health Affairs

Volumn 20, Issue 5, 2001, Pages 11-29

  Cutler, David M ^a   McClellan, Mark ^b  

^a HARVARD UNIVERSITY   (United States)

^b STANFORD UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ARTICLE; BREAST TUMOR; CATARACT EXTRACTION; COST BENEFIT ANALYSIS; DEPRESSION; ECONOMICS; HEALTH CARE COST; HEALTH CARE POLICY; HEART INFARCTION; HUMAN; LOW BIRTH WEIGHT; MEDICAL TECHNOLOGY; NEWBORN; UNITED STATES;

BIOMEDICAL TECHNOLOGY; BREAST NEOPLASMS; CATARACT EXTRACTION; COST-BENEFIT ANALYSIS; DEPRESSIVE DISORDER; HEALTH CARE COSTS; HEALTH POLICY; HUMANS; INFANT, LOW BIRTH WEIGHT; INFANT, NEWBORN; MYOCARDIAL INFARCTION; UNITED STATES;

EID: 0344646776     PISSN: 02782715     EISSN: None     Source Type: Journal    
DOI: 10.1377/hlthaff.20.5.11     Document Type: Article

References (46)

1. K.G. Manton and X. Gu, "Changes in the Prevalence of Chronic Disability in the United States Black and Nonblack Population above Age 65 from 1982 to 1999," Proceedings of the National Academy of Sciences (22 May 2001): 6354-6359.
2. U.S. Department of Health and Human Services, Office of Public Health and Science, Office of Disease Prevention and Health Promotion, Panel on Cost-Effectiveness in Health and Medicine, Cost-Effectiveness in Health and Medicine (Washington: U.S. Government Printing Office, 1996).
3. W.K. Viscusi, "The Value of Risks to Life and Health," Journal of Economic Literature (December 1993): 1912-1946; G. Tolley, D. Kenkel, and R. Fabian, eds., Valuing Health for Policy: An Economic Approach (Chicago: University of Chicago Press, 1994); and K. Murphy and R. Topel, "The Economic Value of Medical Research" (Unpublished paper, University of Chicago, 1999).
4. W.K. Viscusi, "The Value of Risks to Life and Health," Journal of Economic Literature (December 1993): 1912-1946; G. Tolley, D. Kenkel, and R. Fabian, eds., Valuing Health for Policy: An Economic Approach (Chicago: University of Chicago Press, 1994); and K. Murphy and R. Topel, "The Economic Value of Medical Research" (Unpublished paper, University of Chicago, 1999).
5. W.K. Viscusi, "The Value of Risks to Life and Health," Journal of Economic Literature (December 1993): 1912-1946; G. Tolley, D. Kenkel, and R. Fabian, eds., Valuing Health for Policy: An Economic Approach (Chicago: University of Chicago Press, 1994); and K. Murphy and R. Topel, "The Economic Value of Medical Research" (Unpublished paper, University of Chicago, 1999).
6. There is substantial debate about whether such costs ought tabe included in the analysis or not. See Panel on Cost-Effectiveness in Health and Medicine, Cost-Effectiveness in Health and Medicine; and D. Meltzer, "Accounting for Future Costs in Medical Cost-Effectiveness Analysis," Journal of Health Economics (Jan/Feb 1997): 33-64. These two sources present opposing views. Conceptually, such costs ought to be included, but so too should the gains from extending longevity. To see why, consider the simplistic case of a medical technology that at negligible monetary cost would add one year to the life of a person just about to die. The technology will be worthwhile if the value to society of the person living a year is greater than the cost to society of having the person alive. Omitting either the costs or benefits from this equation biases the answer. The argument against including these costs and benefits has largely been based on the practical difficulty of doing so.
7. There is substantial debate about whether such costs ought tabe included in the analysis or not. See Panel on Cost-Effectiveness in Health and Medicine, Cost-Effectiveness in Health and Medicine; and D. Meltzer, "Accounting for Future Costs in Medical Cost-Effectiveness Analysis," Journal of Health Economics (Jan/Feb 1997): 33-64. These two sources present opposing views. Conceptually, such costs ought to be included, but so too should the gains from extending longevity. To see why, consider the simplistic case of a medical technology that at negligible monetary cost would add one year to the life of a person just about to die. The technology will be worthwhile if the value to society of the person living a year is greater than the cost to society of having the person alive. Omitting either the costs or benefits from this equation biases the answer. The argument against including these costs and benefits has largely been based on the practical difficulty of doing so.
8. This is the approach followed by J.P. Bunker, H.S. Frazier, and F. Mosteller, "Improving Health: Measuring Effects of Medical Care," Milbank Quarterly 72, no. 2 (1994): 225-258.
9. As we discuss later, one exception is heart attack care, where clinical trial evidence on treatment effects as well as epidemiologic evidence on specific treatment trends is extensive.
10. D.M. Cutler et al., "Are Medical Prices Falling?" Quarterly Journal of Economics (November 1998): 991-1024; and D.M. Cutler et al., "Pricing Heart Attack Treatments," in Medical Care Productivity and Output, ed. D. Cutler and E. Berndt (Chicago: University of Chicago Press, 2001).
11. D.M. Cutler et al., "Are Medical Prices Falling?" Quarterly Journal of Economics (November 1998): 991-1024; and D.M. Cutler et al., "Pricing Heart Attack Treatments," in Medical Care Productivity and Output, ed. D. Cutler and E. Berndt (Chicago: University of Chicago Press, 2001).
12. Hospital spending is the bulk of costs for heart attack patients. Incorporating more limited data on physician services does not change our conclusions qualitatively.
13. J.P. Newhouse, "Medical Care Costs: How Much Welfare Loss?" Journal of Economic Perspectives (Summer 1992): 3-21; D.M. Cutler, "Technology, Health Costs, and the NIH" (Paper presented at the National Institutes of Health Economic Roundtable on Biomedical Research, Bethesda, Maryland, November 1995); and E.A. Peden and M.S. Freeland, "A Historical Analysis of Medical Spending Growth, 1960-1993," Health Affairs (Summer 1995): 235-247.
14. J.P. Newhouse, "Medical Care Costs: How Much Welfare Loss?" Journal of Economic Perspectives (Summer 1992): 3-21; D.M. Cutler, "Technology, Health Costs, and the NIH" (Paper presented at the National Institutes of Health Economic Roundtable on Biomedical Research, Bethesda, Maryland, November 1995); and E.A. Peden and M.S. Freeland, "A Historical Analysis of Medical Spending Growth, 1960-1993," Health Affairs (Summer 1995): 235-247.
15. J.P. Newhouse, "Medical Care Costs: How Much Welfare Loss?" Journal of Economic Perspectives (Summer 1992): 3-21; D.M. Cutler, "Technology, Health Costs, and the NIH" (Paper presented at the National Institutes of Health Economic Roundtable on Biomedical Research, Bethesda, Maryland, November 1995); and E.A. Peden and M.S. Freeland, "A Historical Analysis of Medical Spending Growth, 1960-1993," Health Affairs (Summer 1995): 235-247.
16. Cutler et al., "Pricing Heart Attack Treatments," has a detailed discussion of the methods used.
17. P.A. Heidenreich and M. McClellan, "Trends in Treatment and Outcomes for Acute Myocardial Infarction: 1975-1995," American Journal of Medicine (15 February 2001): 165-174, examines trends in characteristics of heart attack patients from samples such as the Worcester Heart Attack Study and the Minnesota Heart Study.
18. D.M. Cutler and E. Meara, "The Technology of Birth: Is It Worth It?" in Frontiers in Health Policy Research, vol. 3, ed. A. Garber (Cambridge, Mass.: MIT Press, 2000): 33-67.
19. Average birth-related costs are about $20,000 per low-birthweight baby. The remainder are Medicaid and disability spending for disabled children and special education costs for severely disabled children during school years. The probability that a child has any disability in 1990 is about two-thirds for the very lightest infants (under 1,000 grams) and about one-quarter for the remaining low-birthweight infants. About half of children with disability are severely disabled.
20. Maternal behavior has a powerful influence on the birthweight of the baby but, conditional on birthweight, does not have a large impact on infant survival.
21. The undiscounted value is $1.2 million. The present value is lower because a baby who survives will live about seventy years on average, and many of these years are far in the future.
22. E.R. Berndt et al., "The Medical Treatment of Depression, 1991-1996: Productive Inefficiency, Expected Outcome Variations, and Price Indexes," NBER Working Paper no. 7816 (Cambridge, Mass.: National Bureau of Economic Research, July 2000); R.G. Frank et al., "The Value of Mental Health Care at the System Level: The Case of Treating Depression," Health Affairs (Sep/Oct 1999): 71-88; and E.R. Berndt, S.H. Busch, and R.G. Frank, "Price Indexes for Acute Phase Treatment of Depression," in Medical Care Output and Productivity, ed. Cutler and Berndt.
23. E.R. Berndt et al., "The Medical Treatment of Depression, 1991-1996: Productive Inefficiency, Expected Outcome Variations, and Price Indexes," NBER Working Paper no. 7816 (Cambridge, Mass.: National Bureau of Economic Research, July 2000); R.G. Frank et al., "The Value of Mental Health Care at the System Level: The Case of Treating Depression," Health Affairs (Sep/Oct 1999): 71-88; and E.R. Berndt, S.H. Busch, and R.G. Frank, "Price Indexes for Acute Phase Treatment of Depression," in Medical Care Output and Productivity, ed. Cutler and Berndt.
24. E.R. Berndt et al., "The Medical Treatment of Depression, 1991-1996: Productive Inefficiency, Expected Outcome Variations, and Price Indexes," NBER Working Paper no. 7816 (Cambridge, Mass.: National Bureau of Economic Research, July 2000); R.G. Frank et al., "The Value of Mental Health Care at the System Level: The Case of Treating Depression," Health Affairs (Sep/Oct 1999): 71-88; and E.R. Berndt, S.H. Busch, and R.G. Frank, "Price Indexes for Acute Phase Treatment of Depression," in Medical Care Output and Productivity, ed. Cutler and Berndt.
25. See, for example, R.M. Hirschfeld et al., "The National Depressive and Manic-Depressive Association Consensus Statement on the Undertreatment of Depression," Journal of the American Medical Association (22/29 January 1997): 333-340.
26. The National Ambulatory Medical Care Survey shows such an increase.
27. A typical episode of depression lasts about half a year, and medication results in a roughly 30 percent reduction in depressive symptoms. Thus, the impact on time spent depressed is about eight weeks. See Agency for Health Care Policy and Research, Depression in Primary Care, Clinical Practice Guideline No. 5 (Washington: AHCPR, 1993).
28. D.L Sackett and G.W. Torrence, "The Utility of Different Health States as Perceived by the General Public," Journal of Chronic Diseases (November 1978): 697-704; D.G. Frybeck et al., "The Beaver Dam Health Outcomes Study: Initial Catalog of Health-State Quality Factors," Medical Decision Making (April-June 1993): 89-102; S.F. Anton and D.A. Revicki, "The Use of Decision Analysis in the Pharmacoeconomic Evaluation of an Antidepressant: A Cost-Effectiveness Study of Nefazodone," Psychopharmacology Bulletin (Summer 1995): 249-258; and C.J.L. Murray and A.D. Lopez, eds., The Global Burden of Disease : A Comprehensive Assessment of Mortality and Disability from Diseases, Injuries, and Risk Factors in 1990 and Projected to 2020 (Cambridge, Mass.: Harvard University Press, 1996).
29. D.L Sackett and G.W. Torrence, "The Utility of Different Health States as Perceived by the General Public," Journal of Chronic Diseases (November 1978): 697-704; D.G. Frybeck et al., "The Beaver Dam Health Outcomes Study: Initial Catalog of Health-State Quality Factors," Medical Decision Making (April-June 1993): 89-102; S.F. Anton and D.A. Revicki, "The Use of Decision Analysis in the Pharmacoeconomic Evaluation of an Antidepressant: A Cost-Effectiveness Study of Nefazodone," Psychopharmacology Bulletin (Summer 1995): 249-258; and C.J.L. Murray and A.D. Lopez, eds., The Global Burden of Disease : A Comprehensive Assessment of Mortality and Disability from Diseases, Injuries, and Risk Factors in 1990 and Projected to 2020 (Cambridge, Mass.: Harvard University Press, 1996).
30. D.L Sackett and G.W. Torrence, "The Utility of Different Health States as Perceived by the General Public," Journal of Chronic Diseases (November 1978): 697-704; D.G. Frybeck et al., "The Beaver Dam Health Outcomes Study: Initial Catalog of Health-State Quality Factors," Medical Decision Making (April-June 1993): 89-102; S.F. Anton and D.A. Revicki, "The Use of Decision Analysis in the Pharmacoeconomic Evaluation of an Antidepressant: A Cost-Effectiveness Study of Nefazodone," Psychopharmacology Bulletin (Summer 1995): 249-258; and C.J.L. Murray and A.D. Lopez, eds., The Global Burden of Disease : A Comprehensive Assessment of Mortality and Disability from Diseases, Injuries, and Risk Factors in 1990 and Projected to 2020 (Cambridge, Mass.: Harvard University Press, 1996).
31. D.L Sackett and G.W. Torrence, "The Utility of Different Health States as Perceived by the General Public," Journal of Chronic Diseases (November 1978): 697-704; D.G. Frybeck et al., "The Beaver Dam Health Outcomes Study: Initial Catalog of Health-State Quality Factors," Medical Decision Making (April-June 1993): 89-102; S.F. Anton and D.A. Revicki, "The Use of Decision Analysis in the Pharmacoeconomic Evaluation of an Antidepressant: A Cost-Effectiveness Study of Nefazodone," Psychopharmacology Bulletin (Summer 1995): 249-258; and C.J.L. Murray and A.D. Lopez, eds., The Global Burden of Disease : A Comprehensive Assessment of Mortality and Disability from Diseases, Injuries, and Risk Factors in 1990 and Projected to 2020 (Cambridge, Mass.: Harvard University Press, 1996).
32. In another metric, Frank and colleagues estimate that incremental spending per QALY is about $15,000, which is well below the value of a year of quality-adjusted life. Frank et al., "The Value of Mental Health Care."
33. I. Shapiro, M.D. Shapiro, and D.W. Wilcox, "Measuring the Value of Cataract Surgery," in Medical Care Output and Productivity, ed. Cutler and Berndt.
34. D.M. Cutler and M. McClellan, "The Productivity of Cancer Care" (Unpublished paper, Harvard University, 2001).
35. For a discussion, see A.B. Nottinger, "Older Women, Mammography, and Mortality from Breast Cancer," American Journal of Medicine (February 2000): 174-175, and the references therein.
36. To isolate the role of breast cancer treatments, we consider deaths only from breast cancer.
37. For discussion, see D.M. Cutler and E. Richardson, "Your Money and Your Life: The Value of Health and What Affects It," in Frontiers in Health Policy Research vol. 2, ed. A. Garber (Cambridge, Mass.: MIT Press, 1999), 99-132.
38. P.A. Sytkowski, W.B. Kannel, and R.B. D'Agostino, "Changes in Risk Factors and the Decline in Mortality from Cardiovascular Disease," New England Journal of Medicine (7 June 1990): 1635-1641.
39. L. Baker and M. Brown, "The Effect of Managed Care on Health Care Providers," RAND Journal of Economics (Summer 1999): 351-374; M.E. Chernew et al., "Managed Care, Medical Technology, and Health Care Cost Growth: A Review of the Evidence," Medical Care Research and Review (September 1998): 259-288; and D. Cutler and L. Sheiner, "Managed Care and the Growth of Medical Expenditures," in Frontiers in Health Policy Research, vol. l, ed. A. Garber (Cambridge, Mass.: MIT Press, 1998), chap, 3, 77-115.
40. L. Baker and M. Brown, "The Effect of Managed Care on Health Care Providers," RAND Journal of Economics (Summer 1999): 351-374; M.E. Chernew et al., "Managed Care, Medical Technology, and Health Care Cost Growth: A Review of the Evidence," Medical Care Research and Review (September 1998): 259-288; and D. Cutler and L. Sheiner, "Managed Care and the Growth of Medical Expenditures," in Frontiers in Health Policy Research, vol. l, ed. A. Garber (Cambridge, Mass.: MIT Press, 1998), chap, 3, 77-115.
41. L. Baker and M. Brown, "The Effect of Managed Care on Health Care Providers," RAND Journal of Economics (Summer 1999): 351-374; M.E. Chernew et al., "Managed Care, Medical Technology, and Health Care Cost Growth: A Review of the Evidence," Medical Care Research and Review (September 1998): 259-288; and D. Cutler and L. Sheiner, "Managed Care and the Growth of Medical Expenditures," in Frontiers in Health Policy Research, vol. l, ed. A. Garber (Cambridge, Mass.: MIT Press, 1998), chap, 3, 77-115.
42. Two studies that consider dynamic effects, at least over short time periods, are D.P. Kessler and M. McClellan, "Do Doctors Practice Defensive Medicine?" Quarterly Journal of Economics (May 1996): 353-390;
43. and D.P. Kessler and M. McClellan, "Is Hospital Competition Socially Wasteful?" Quarterly Journal of Economics (May 2000): 577-615. These studies find one-time beneficial productivity effects of malpractice liability limits and increased competition, respectively. However, they find little evidence of dynamic effects on productivity.
44. E. Berndt et al., "Medical Care Prices and Output," in Handbook of Health Economics, vol. IA, ed. A.J. Culyer and J.P. Newhouse (Amsterdam: Elsevier, 2000), 119-180.
45. In other work with Joseph Newhouse, we have begun to develop evidence on this question. D.M. Cutler, M. McClellan, and J.P. Newhouse, "What Does Managed Care Do?" RAND Journal of Economics (August 2000): 526-548.
46. This approach is conceptually similar to the understanding of investment at the aggregate level, which involves the analysis of about 800 separate types of investment. See J. Triplett, "What's Different about Health? Human Repair and Car Repair in National Accounts and National Health Accounts," in Medical Care Output and Productivity, ed. Cutler and Berndt.