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Estimating Marginal Returns to Medical Care: Evidence from At-Risk Newborns

61 Pages Posted: 8 Dec 2008 Last revised: 6 Aug 2014

Douglas Almond Jr.

Columbia University - Graduate School of Arts and Sciences, Department of Economics; National Bureau of Economic Research (NBER)

Joseph J. Doyle Jr.

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA); National Bureau of Economic Research (NBER)

Amanda Ellen Kowalski

National Bureau of Economic Research (NBER); Yale University

Heidi L. Williams

MIT Department of Economics; National Bureau of Economic Research (NBER)

Date Written: December 2008

Abstract

We estimate marginal returns to medical care for at-risk newborns by comparing health outcomes and medical treatment provision on either side of common risk classifications, most notably the "very low birth weight" threshold at 1500 grams. First, using data on the census of US births in available years from 1983-2002, we find evidence that newborns with birth weights just below 1500 grams have lower one-year mortality rates than do newborns with birth weights just above this cutoff, even though mortality risk tends to decrease with birth weight. One-year mortality falls by approximately one percentage point as birth weight crosses 1500 grams from above, which is large relative to mean one-year mortality of 5.5% just above 1500 grams. Second, using hospital discharge records for births in five states in available years from 1991-2006, we find evidence that newborns with birth weights just below 1500 grams have discontinuously higher costs and frequencies of specific medical inputs. We estimate a $4,000 increase in hospital costs as birth weight approaches 1500 grams from above, relative to mean hospital costs of $40,000 just above 1500 grams. Taken together, these estimates suggest that the cost of saving a statistical life of a newborn with birth weight near 1500 grams is on the order of $550,000 in 2006 dollars.

Suggested Citation

Almond, Douglas and Doyle, Joseph J. and Kowalski, Amanda Ellen and Williams, Heidi L., Estimating Marginal Returns to Medical Care: Evidence from At-Risk Newborns (December 2008). NBER Working Paper No. w14522. Available at SSRN: https://ssrn.com/abstract=1312618

Douglas Vincent Almond Jr. (Contact Author)

Columbia University - Graduate School of Arts and Sciences, Department of Economics ( email )

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Joseph John Doyle Jr.

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA) ( email )

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National Bureau of Economic Research (NBER)

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Amanda Ellen Kowalski

National Bureau of Economic Research (NBER) ( email )

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United States

Yale University ( email )

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New Haven, CT 06520-8268
United States

Heidi L. Williams

MIT Department of Economics ( email )

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Cambridge, MA 02142
United States
(617) 324-4326 (Phone)
(617) 253-1330 (Fax)

HOME PAGE: http://econ-www.mit.edu/faculty/heidiw

National Bureau of Economic Research (NBER)

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