Public Liabilities and Health Care Policy

34 Pages Posted: 30 Nov 2012

See all articles by Kristopher Hult

Kristopher Hult

University of Chicago

Tomas Philipson

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

Date Written: November 2012


Many countries have large future public liabilities attributable to health care programs. However, little explicit analysis exists about how health care policies affect these program liabilities. We analyze how reimbursement and approval policies affect public liabilities through their impact on the returns to medical innovation, a central factor driving spending growth. We consider how policies impact innovative returns through expected earnings, their risk-adjustment, and their timing and defaults through the approval process. Our analysis implies that cutbacks in government programs may raise government liabilities and expansions may lower them. We quantitatively calibrate these non-standard effects for the US Medicare program.

Suggested Citation

Hult, Kristopher and Philipson, Tomas J., Public Liabilities and Health Care Policy (November 2012). NBER Working Paper No. w18571. Available at SSRN:

Kristopher Hult (Contact Author)

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

Tomas J. Philipson

University of Chicago ( email )

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

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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