Working Paper: NBER ID: w18571
Authors: Kristopher J. Hult; Tomas J. Philipson
Abstract: 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.
Keywords: health care policy; public liabilities; medical innovation
JEL Codes: I11; I13; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| cutbacks in government programs (H53) | future public liabilities (H69) |
| expansions in government programs (H53) | future public liabilities (H69) |
| government expansions (H59) | lower demand prices (R22) |
| government expansions (H59) | lower supply prices (Q31) |
| government program size (H53) | innovative returns (O36) |
| expanding public programs (H53) | raise innovative returns for poorer populations (O35) |
| expanding public programs (H53) | lower innovative returns for richer populations (O39) |
| risk adjustments of expected earnings (G22) | innovative returns (O36) |
| mean-testing approach to Medicare (H51) | raise innovative returns (O35) |
| government policy (F68) | present value of public program liabilities (H55) |