Paying on the Margin for Medical Care: Evidence from Breast Cancer Treatments

43 Pages Posted: 16 Jun 2014 Last revised: 30 Sep 2014

See all articles by Liran Einav

Liran Einav

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Amy Finkelstein

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Heidi L. Williams

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

Date Written: June 2014

Abstract

We present a simple graphical framework to illustrate the potential welfare gains from a “top-up” health insurance policy requiring patients to pay the incremental price for more expensive treatment options. We apply this framework to breast cancer treatments, where lumpectomy with radiation therapy is more expensive than mastectomy but generates similar average health benefits. We estimate the relative demand for lumpectomy using variation in distance to the nearest radiation facility, and estimate that the “top-up” policy increases social welfare by $700-2,500 per patient relative to two common alternatives. We briefly discuss additional tradeoffs that arise from an ex-ante perspective.

Suggested Citation

Einav, Liran and Finkelstein, Amy and Williams, Heidi L., Paying on the Margin for Medical Care: Evidence from Breast Cancer Treatments (June 2014). NBER Working Paper No. w20226. Available at SSRN: https://ssrn.com/abstract=2450926

Liran Einav (Contact Author)

Stanford University - Department of Economics ( email )

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Amy Finkelstein

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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Heidi L. Williams

MIT Department of Economics ( email )

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(617) 253-1330 (Fax)

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

National Bureau of Economic Research (NBER)

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