Working Paper: NBER ID: w9311
Authors: David M. Cutler; Robert S. Huckman
Abstract: A puzzling feature of many medical innovations is that they simultaneously appear to reduce unit costs and increase total costs. We consider this phenomenon by examining the diffusion of percutaneous transluminal coronary angioplasty (PTCA) -- a treatment for coronary artery disease -- over the past two decades. We find that growth in the use of PTCA led to higher total costs despite its lower unit cost. Over the two decades following PTCA's introduction, however, we find that the magnitude of this increase was reduced by between 10% and 20% due to the substitution of PTCA for CABG. In addition, the increased use of PTCA appears to be a productivity improvement. PTCAs that substitute for CABG cost less and have the same or better outcomes, while PTCAs that replace medical management appear to improve health by enough to justify the cost.
Keywords: angioplasty; medical innovation; healthcare costs; productivity
JEL Codes: I1; O3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| PTCA usage increase (O57) | total costs increase (J30) |
| PTCA usage increase (O57) | CABG procedures decrease (G33) |
| PTCA substituting for CABG (H44) | lower costs and equal or better outcomes (I14) |
| PTCA replacing traditional medical management (F38) | improved health outcomes (I14) |
| treatment expansion (I18) | total costs increase (J30) |