Endogenous Cost-Effectiveness Analysis in Health Care Technology Adoption

29 Pages Posted: 3 Jun 2009 Last revised: 28 Oct 2010

See all articles by Anupam B. Jena

Anupam B. Jena

Harvard University; National Bureau of Economic Research (NBER)

Tomas Philipson

University of Chicago; National Bureau of Economic Research (NBER)

Date Written: June 2009

Abstract

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 invariably reflects prices set by producers rather than resources used to produce treatments. This implies that the "costs" in cost-effectiveness assessments depend on endogenous markups which are, in turn, influenced by demand factors of patients, doctors, and payers. Reimbursement policy based on endogenous cost-effectiveness levels may therefore bear little relationship to efficient use of scarce medical resources. Using data on technology appraisals in the United Kingdom, we test for conditions under which adoption based on endogenous cost-effectiveness may lead to adoption of more inefficient treatments in terms of resource use.

Suggested Citation

Jena, Anupam B. and Philipson, Tomas J., Endogenous Cost-Effectiveness Analysis in Health Care Technology Adoption (June 2009). NBER Working Paper No. w15032. Available at SSRN: https://ssrn.com/abstract=1413596

Anupam B. Jena

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Tomas J. Philipson (Contact Author)

University of Chicago ( email )

Graduate School of Business
1101 East 58th Street
Chicago, 60637

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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