This PDF is a selection from an out-of-print volume from the National Bureauof Economic Research

Volume Title: Medical Care Output and Productivity

Volume Author/Editor: David M. Cutler and Ernst R. Berndt, editors

Volume Publisher: University of Chicago Press

Volume ISBN: 0-226-13226-9

Volume URL: http://www.nber.org/books/cutl01-1

Publication Date: January 2001

Chapter Title: Front matter, "Medical Care Output and Productivity"

Chapter Author: David M. Cutler, Ernst R. Berndt

Chapter URL: http://www.nber.org/chapters/c7622

Chapter pages in book: (p. -14 - 0)

This Page Intentionally Left Blank

Medical Care Output and Productivity

National Bureau of Economic Research

Conference on Research in Income and Wealth

Medical Care Output and Productivity

Edited by David M. Cutler and Ernst R. Berndt

The University of Chicago Press

Chicago and London

DAVID M . CUTLER is professor of economics at Harvard University and a research associate of the National Bureau of Economic Research. ERNST R . B E R N D T is professor of applied economics at the Sloan School of Management of the Massachusetts Institute of Technology and director of the NBER’s Program on Technological Progress and Productivity Measurement.

The University of Chicago Press, Chicago 60637 The University of Chicago Press, Ltd., London 0 2001 by the National Bureau of Economic Research All rights reserved. Published 2001 Printed in the United States of America

10090807060504030201 1 2 3 4 5

ISBN: 0-226-1 3226-9 (cloth)

Copyright is not claimed for the “Comment” on chap. 4 by Brent R. Moulton; chap. 5 by Ina Kay Ford and Daniel H. Ginsburg; chap. 6 by Dennis Fixler and Mitchell Ginsburg; chap. 9 by Paul Heidenreich and Mark McClellan; and chap. 10 by Irving Shapiro, Matthew D. Shapiro, and David W. Wilcox

Library of Congress Cataloging-in-Publication Data

Medical care output and productivity I edited by David M. Cutler and Ernst R. Berndt.

Includes bibliographical references and index. ISBN 0-226-13226-9 (cloth : alk. paper) 1, Medical care-Cost effectiveness-Econometric models-

Congresses. 2. Medical care, Cost of-Congresses. I. Cutler, David M. 11. Berndt, Ernst R. 111. Series.

p. cm.-(Studies in income and wealth ; v. 62)

RA410.5 .M425 2001 338.4’33621 -dc21 00-067235

@ The paper used in this publication meets the minimum requirements of the American National Standard for Information Sciences-Permanence of Paper for Printed Library Materials, ANSI 239.48-1992.

National Bureau of Economic Research

Officers

Carl F. Christ, chairman Kathleen B. Cooper, vice-chairman Martin Feldstein, president and chief

Robert Mednick, treasurer secretary

Susan Colligan, corporate secretary Kelly Horak, controller and assistant

Gerardine Johnson, assistant corporate corporate secretary

executive ofJicer

Directors at Large

Peter C. Aldrich Elizabeth E. Bailey John H. Biggs Andrew Brimmer Carl F. Christ Don R. Conlan Kathleen B. Cooper George C. Eads

Martin Feldstein Stephen Friedman George Hatsopoulos Karen N. Horn Judy C. Lewent John Lipsky Leo Melamed Michael H. Moskow

Rudolph A. Oswald Robert T. Parry Peter G. Peterson Richard N. Rosett Kathleen P. Utgoff Marina v. N. Whitman Martin B. Zimmerman

Directors by University Appointment

George Akerlof, California, Berkeley Jagdish Bhagwati, Columbia William C. Brainard, Yale Glen G. Cain, Wisconsin Franklin Fisher, Massachusetts Institute

Saul H. Hymans, Michigan Marjorie B. McElroy, Duke

Joel Mokyr, Northwestern Andrew Postlewaite, Pennsylvania Nathan Rosenberg, Stanford Michael Rothschild, Princeton Craig Swan, Minnesota David B. Yoffie, Harvard Arnold Zellner, Chicago

of Technology

Directors by Appointment of Other Organizations

Marcel Boyer, Canadian Economics

Mark Drabenstott, American Agricultural

Gail D. Fosler, The Conference Board A. Ronald Gallant, American Statistical

Robert S. Hamada, American Finance

Robert Mednick, American Institute of

Association

Economics Association

Association

Association

Certified Public Accountants

Richard D. Rippe, National Association for

John J. Siegfried, American Economic

David A. Smith, American Federation of

Business Economics

Association

Labor and Congress of Industrial Organizations

Development

Association

Josh S. Weston, Committee for Economic

Gavin Wright, Economic History

Directors Emeriti

Moses Abramovitz Franklin A. Lindsay Eli Shapiro Thomas D. Flynn Lawrence R. Klein Bert Seidman

Since this volume is a record of conference proceedings, it has been exempted from the rules governing critical review of manuscripts by the Board of Directors of the National Bureau (resolution adopted 8 June 1948, as revised 21 November 1949 and 20 April 1968).

Paul W. McCracken

This Page Intentionally Left Blank

Contents

Prefatory Note xi

Introduction 1 David M. Cutler and Ernst R. Berndt

I. CONCEPTUAL ISSUES IN MEDICAL CARE PRICES AND PRODUCTIVITY

1. What’s Different about Health? Human Repair and Car Repair in National Accounts and in National Health Accounts 15 Jack E. Triplett Comment: Zvi Griliches

2. Theoretical Foundations of Medical Cost- Effectiveness Analysis: Implications for the Measurement of Benefits and Costs of Medical Interventions 97 David Meltzer Comment: Douglas L. Cocks

3. Medical Care Output and Productivity in the Nonprofit Sector 119 Tomas Philipson and Darius Lakdawalla Comment: Richard G. Frank

vii

viii Contents

4. Price Indexes for Medical Care Goods and Services: An Overview of Measurement Issues Ernst R . Berndt, David M. Cutler, Richard G. Frank, Zvi Griliches, Joseph P. Newhouse, and Jack E. Triplett Comment: Brent R. Moulton

141

11. CURRENT STATE OF MEASUREMENT

5. Medical Care in the Consumer Price Index Ina Kay Ford and Daniel H. Ginsburg Comment: Joseph P. Newhouse

Price Index 22 1 Dennis Fixler and Mitchell Ginsburg Comment: Joseph P. Newhouse

203

6. Health Care Output and Prices in the Producer

7. National Health AccountslNational Income and Product Accounts Reconciliation: Hospital Care and Physician Services Arthur Sensenig and Ernest Wilcox Comment: Haiden A. Huskamp

111. RECENT DEVELOPMENTS

8. Pricing Heart Attack Treatments David M. Cutler, Mark McClellan, Joseph P. Newhouse, and Dahlia Remler Comment: Frank C. Wykoff

27 1

305

9. Trends in Heart Attack Treatment and Outcomes, 1975-1995: Literature Review and Synthesis 363 Paul Heidenreich and Mark McClellan

41 1 10. Measuring the Value of Cataract Surgery Irving Shapiro, Matthew D. Shapiro, and David W. Wilcox

11. Hedonic Analysis of Arthritis Drugs 439 Iain M. Cockburn and Aslam H. Anis Comment: J. Steven Landefeld

Contents ix

12. Treatment Price Indexes for Acute Phase Major Depression 463 Ernst R. Berndt, Susan H. Busch, and Richard G. Frank Comment: Darrel A. Regier

IV. EXTENSIONS OF THE FRONTIER

13. The Value of Reductions in Child Injury Mortality in the United States Sherry Glied Comment: James A. Schuttinga

511

14. Patient Welfare and Patient Compliance: An Empirical Framework for Measuring the Benefits from Pharmaceutical Innovation 539 Paul Ellickson, Scott Stern, and Manuel Trajtenberg Comment: Jonathan Skinner

15. The Allocation of Publicly Funded Biomedical Research Frank R. Lichtenberg

Contributors Author Index Subject Index

565

59 1 595 603

This Page Intentionally Left Blank

Prefatory Note

This volume contains revised versions of most of the papers and discussion presented at the Conference on Research in Income and Wealth entitled “Medical Care Output and Productivity,” held in Bethesda, Maryland, on 12-13 June 1998. It also contains some material not presented at that con- ference.

Funds for the Conference on Research in Income and Wealth are sup- plied by the Bureau of Labor Statistics, the Bureau of Economic Analysis, the Federal Reserve Board, and the Bureau of the Census; we are indebted to them for their support.

We thank David M. Cutler and Ernst R. Berndt, who served as confer- ence organizers and editors of the volume, and the NBER staff and Uni- versity of Chicago Press editors for their assistance in organizing the con- ference and editing the volume.

Executive Committee, July 2000

Ernst R. Berndt Charles R. Hulten, chair Carol S. Carson Lawrence F. Katz Carol A. Corrado J. Steven Landefeld Edwin R. Dean Robert H. McGuckin I11 Robert C. Feenstra Brent R. Moulton John Greenlees Matthew Shapiro John C. Haltiwanger Robert Summers

xi

xii Prefatory Note

Volume Editors’ Acknowledgments

Many individuals assisted in putting together this volume. Substantial funding for the volume, as well as for many of the research projects, was provided to the National Bureau of Economic Research by the Bureau of Labor Statistics, the Bureau of Economic Analysis, the National Institute on Aging, the National Science Foundation, and Eli Lilly and Company. We are grateful to each for their support. We are also grateful to the au- thors and discussants who so ably brought forward the intricacies of this issue.

The NBER Conference Department, under the able direction of Kirsten Foss Davis, superbly organized the conference at which these research pa- pers were presented. We are also grateful to Helena Fitz-Patrick, who pro- vided extensive support in coordinating the publication of this volume.