Working Paper: NBER ID: w19761
Authors: Jeffrey Clemens
Abstract: I study the channels through which health insurance influences medical innovation. Following Medicare and Medicaid's passage, I find that U.S.-based medical-equipment patenting rose by 40 to 50 percent relative to both other U.S. patenting and foreign medical-equipment patenting. Within the United States, increases in medical-equipment patenting were most dramatic in states where the Great Society insurance expansions were largest and in which there were large baseline numbers of physicians per resident. Consistent with historical case studies, Medical innovation's determinants extend beyond the potential revenues associated with global market size; a physician driven process of innovation-while-doing appears to play a central role. An extrapolation of the evidence suggests that the last half century's U.S. insurance expansions have driven 25 percent of recent global medical-equipment innovation. In a standard decomposition of health spending growth, this insurance-induced innovation accounts for 15 percent of the long run rise in U.S. health spending in hospitals, physicians' offices, and other clinical settings.
Keywords: Health Insurance; Medical Innovation; Patenting; Medicare; Medicaid
JEL Codes: H51; H57; I1; I13; O3; O31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Local physician density (I11) | Increase in US-based medical equipment patenting (L64) |
| Introduction of Medicare and Medicaid (I18) | Increase in US-based medical equipment patenting (L64) |
| US health insurance expansions (I13) | Contribution to global medical equipment innovation (O36) |
| Insurance-induced innovation (G52) | Increase in US health spending in clinical settings (H51) |