The Effect of U.S. Health Insurance Expansions on Medical Innovation

SIEPR Discussion Paper No. 11-016

74 Pages Posted: 5 Jul 2012 Last revised: 13 Dec 2013

See all articles by Jeffrey P. Clemens

Jeffrey P. Clemens

University of California, San Diego (UCSD) - Department of Economics; NBER

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Date Written: December 12, 2013


I study the channels through which health insurance influences medical innovation. Following Medicare and Medicaid's passage, I find that U.S.-based medical-equipment patenting rose by 40 to 50 percent relative to both other U.S. patenting and foreign medical-equipment patenting. Within the United States, increases in medical-equipment patenting were most dramatic in states where the Great Society insurance expansions were largest and in which there were large baseline numbers of physicians per resident. Consistent with historical case studies, Medical innovation's determinants extend beyond the potential revenues associated with global market size; a physician driven process of innovation-while-doing appears to play a central role. An extrapolation of the evidence suggests that the last half century's U.S. insurance expansions have driven 25 percent of recent global medical-equipment innovation. In a standard decomposition of health spending growth, this insurance-induced innovation accounts for 15 percent of the long run rise in U.S. health spending in hospitals, physicians' offices, and other clinical settings.

Keywords: Health Insurance, Government Policy, Innovation and Invention, Government Expenditures and Health

JEL Classification: I13, O38, O31, H51

Suggested Citation

Clemens, Jeffrey P., The Effect of U.S. Health Insurance Expansions on Medical Innovation (December 12, 2013). SIEPR Discussion Paper No. 11-016. Available at SSRN: or

Jeffrey P. Clemens (Contact Author)

University of California, San Diego (UCSD) - Department of Economics ( email )

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