Working Paper: NBER ID: w16990
Authors: Amitabh Chandra; Anupam B. Jena; Jonathan S. Skinner
Abstract: All developed countries have been struggling with a trend toward health care absorbing an ever-larger fraction of government and private budgets. Adopting any treatment that improves health outcomes, no matter what the cost, can worsen allocative inefficiency by paying dearly for small health gains. One potential solution is to rely more heavily on studies of the costs and effectiveness of new technologies in an effort to ensure that new spending is justified by a commensurate gain in consumer benefits. But not everyone is a fan of such studies and we discuss the merits of comparative effectiveness studies and its cousin, cost-effectiveness analysis. We argue that effectiveness research can generate some moderating effects on cost growth in healthcare if such research can be used to nudge patients away from less-effective therapies, whether through improved decision making or by encouraging beefed-up copayments for cost-ineffective procedures. More promising still for reducing growth is the use of a cost-effectiveness framework to better understand where the real savings lie--and the real savings may well lie in figuring out the complex interaction and fragmentation of healthcare systems.
Keywords: Comparative Effectiveness Research; Cost-Effectiveness Analysis; Healthcare Costs
JEL Codes: H51; I1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| comparative effectiveness research (CER) (H51) | healthcare cost growth (I18) |
| comparative effectiveness research (CER) (H51) | patient choices (I11) |
| patient choices (I11) | healthcare spending (H51) |
| comparative effectiveness research (CER) findings (I13) | clinical practice changes (I11) |
| clinical practice changes (I11) | healthcare costs (I11) |
| comparative effectiveness research (CER) (H51) | treatment effect information (C22) |
| treatment effect information (C22) | health outcomes (I14) |
| health outcomes (I14) | cost savings (D61) |