Insurance and New Technology: From Hospital to Drugstore

Posted: 9 Oct 2001

See all articles by Patricia M. Danzon

Patricia M. Danzon

University of Pennsylvania - Health Care Systems Department; National Bureau of Economic Research (NBER)

Mark V. Pauly

University of Pennsylvania - Health Care Systems Department; National Bureau of Economic Research (NBER)

Abstract

This paper traces the relationship between insurance coverage and the technology-induced shift of the locus of medical care and medical spending from the inpatient to the outpatient setting. This shift was accompanied by an increase in the extent of private insurance coverage for outpatient treatments; technological change both caused the increase in coverage (for more costly treatments) and was affected by it (as lower user prices increased the demand for new types of care). Changes in insurance administration technology also facilitated the transformation. Some aspects of the change may have been inefficient, because of the presence of tax subsidy and legal requirements to cover costly new technologies of low effectiveness, but the transformation appears thus far to have worked better for private insurance than for Medicare.

JEL Classification: I10, I11, I12, I18

Suggested Citation

Danzon, Patricia M. and Pauly, Mark V., Insurance and New Technology: From Hospital to Drugstore. Health Affairs, Vol. 20, No. 5. Available at SSRN: https://ssrn.com/abstract=280906

Patricia M. Danzon (Contact Author)

University of Pennsylvania - Health Care Systems Department ( email )

3641 Locust Walk
Colonial Penn Center
Philadelphia, PA 19104-6358
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Mark V. Pauly

University of Pennsylvania - Health Care Systems Department ( email )

3641 Locust Walk
208 Colonial Penn Center
Philadelphia, PA 19104-6358
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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