The Lifetime Costs and Benefits of Medical Technology

David M. Cutler

NBER Working Paper No. 13478
Issued in October 2007
NBER Program(s):Economics of Aging, Health Care, Health Economics

Measuring the lifetime costs and benefits of medical technologies is essential in evaluating technological change and determining the productivity of medical care. Using data on Medicare beneficiaries with a heart attack in the late 1980s and 17 years of follow up data, I evaluate the long-term costs and benefits of revascularization after a heart attack. I account for non-random selection into treatment with instrumental variables; following McClellan, McNeil, and Newhouse, the instrument is the differential distance to a hospital capable of providing revascularization. The results show that revascularization is associated with over 1 year of additional life expectancy, at a cost of about $40,000. Revascularization, or other treatments correlated with it, appears to be highly cost-effective.

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Acknowledgments

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Document Object Identifier (DOI): 10.3386/w13478

Published: Cutler, David M., 2007. "The lifetime costs and benefits of medical technology," Journal of Health Economics, Elsevier, vol. 26(6), pages 1081-1100, December. citation courtesy of