Medical Care Output and Productivity (Volume 62) (National Bureau of Economic Research Studies in Income and Wealth)

Thông tin sách: Medical Care Output and Productivity (Volume 62) (National Bureau of Economic Research Studies in Income and Wealth) (Hardcover, 544 trang) – University of Chicago Press, 2001. Ngôn ngữ: Tiếng Anh.

With the United States and other developed nations spending as much as 14 percent of their GDP on medical care, economists and policy analysts are asking what these countries are getting in return. Yet it remains frustrating and difficult to measure the productivity of the medical care service industries.This volume takes aim at that problem, while taking stock of where we are in our attempts to solve it. Much of this analysis focuses on the capacity to measure the value of technological change and other health care innovations. A key finding suggests that growth in health care spending has coincided with an increase in products and services that together reduce mortality rates and promote additional health gains. Concerns over the apparent increase in unit prices of medical care may thus understate positive impacts on consumer welfare. When appropriately adjusted for such quality improvements, health care prices may actually have fallen. Provocative and compelling, this volume not only clarifies one of the more nebulous issues in health care analysis, but in so doing addresses an area of pressing public policy concern. About the Author David M. Cutler is a professor of economics at Harvard University, a research associate of the National Bureau of Economic Research, and the editor of The Changing Hospital Industry, published by the University of Chicago Press.

Ernst R. Berndt is a professor of applied economics at MIT's Sloan School of Management, director of the NBER's Program on Technological Progress and Productivity Measurement, and coeditor of Fifty Years of Economic Measurement, published by the University of Chicago Press. Excerpt. © Reprinted by permission. All rights reserved. Medical Care Output and ProductivityThe University of Chicago PressCopyright © 2001 the National Bureau of Economic Research
All right reserved.
ISBN: 978-0-226-13226-6
ContentsPrefatory Note...........................................................................................................................................................................................................xiIntroduction David M. Cutler and Ernst R. Berndt........................................................................................................................................................................1I. Conceptual Issues in Medical Care Prices and Productivity1. What's Different about Health? Human Repair and Car Repair in National Accounts and in National Health Accounts Jack E. Triplett.....................................................................................152. Theoretical Foundations of Medical Cost-Effectiveness Analysis: Implications for the Measurement of Benefits and Costs of Medical Interventions David Meltzer........................................................973. Medical Care Output and Productivity in the Nonprofit Sector Tomas Philipson and Darius Lakdawalla...................................................................................................................1194. 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.....................141II. Current State of Measurement5. Medical Care in the Consumer Price Index Ina Kay Ford and Daniel H. Ginsburg.........................................................................................................................................2036. Health Care Output and Prices in the Producer Price Index Dennis Fixler and Mitchell Ginsburg........................................................................................................................2217. National Health Accounts/National Income and Product Accounts Reconciliation: Hospital Care and Physician Services Arthur Sensenig and Ernest Wilcox.................................................................271III. Recent Developments8. Pricing Heart Attack Treatments David M. Cutler, Mark McClellan, Joseph P. Newhouse, and Dahlia Remler...............................................................................................................3059. Trends in Heart Attack Treatment and Outcomes, 1975-1995: Literature Review and Synthesis Paul Heidenreich and Mark McClellan........................................................................................36310. Measuring the Value of Cataract Surgery Irving Shapiro, Matthew D. Shapiro, and David W. Wilcox.....................................................................................................................41111. Hedonic Analysis of Arthritis Drugs Iain M. Cockburn and Aslam H. Anis..............................................................................................................................................43912. Treatment Price Indexes for Acute Phase Major Depression Ernst R. Berndt, Susan H. Busch, and Richard G. Frank......................................................................................................463IV. Extensions of the Frontier13. The Value of Reductions in Child Injury Mortality in the United States Sherry Glied.................................................................................................................................51114. Patient Welfare and Patient Compliance: An Empirical Framework for Measuring the Benefits from Pharmaceutical Innovation Paul Ellickson, Scott Stern, and Manuel Trajtenberg........................................53915. The Allocation of Publicly Funded Biomedical Research Frank R. Lichtenberg..........................................................................................................................................565Contributors.............................................................................................................................................................................................................591Author Index.............................................................................................................................................................................................................595Subject Index............................................................................................................................................................................................................603
Chapter OneWhat's Different about Health? Human Repair and Car Repair in National Accounts and in National Health Accounts

Jack E. Triplett

The American patient is likely to ... regard doctors as technicians who are periodically called on to repair his physical machinery. -Aaron and Schwartz (1983)

Measuring the output of services industries has long been considered difficult. "The conceptual problem arises because in many service sectors it is not exactly clear what is being transacted, what is the output, and what services correspond to the payments made to their providers" (Griliches 1992, 7). Among the hard-to-measure services, no task has been perceived as more difficult than measuring the output of the health care sector.

Why is measuring health care output so hard? The medical economics literature contains a long list of intimidating and discouraging difficulties. In this paper, I propose to cut through this mostly defeatist list by posing what at first might seem a narrowly focused question: Why is health care different from any other analogous service, such as car repair?

Comparing measurement issues in human repair and car repair is instructive. It is not merely the straightforward analogies: Replacing a shock absorber and replacing a hip are both repairs to a suspension system, diagnostic activity is a crucial part of both production processes, the frequency of costly diagnostic errors is a concern in both types of repairs, and the outputs of both repair industries are enhanced by new technologies for diagnosis and for installation of the part and are also embodied in the part installed. As Vaupel (1998) suggests, the subjects of both repair industries are complicated systems, which is why human and automobile mortality functions look remarkably similar.

More importantly, asking why health is different facilitates asking how health is similar. What can we learn from the way we measure the output of car repair that can be applied to the measurement of human repair and can simplify the health care measurement problem? Health care is different, but is it so different that we have to start over with a new paradigm?

I contend that health is not that different: The paradigm we use for car repair can be applied, with suitable modification, to health care. Emphasizing the similarities in human repair and car repair paradigms makes it easier to design operational measurement strategies. The similarities may also make it easier for national income accountants and users of economic statistics to understand and accept the sometimes controversial extensions to the paradigm that are necessary because health is indeed, in some respects, different.

1.1 Background

Although one might expect that measuring health care output would entail in some manner measuring "health," most prior economic measurement in health care has been conducted without explicit reference to medical care outcomes. Because output measures in the national accounts of most countries are typically produced through deflation-that is, by dividing health expenditures by a price index-medical care price index methodology has determined the concepts embodied in medical care output measures (except of course in national accounts for countries in which medical care is part of the public sector).

Historically in the United States, the Consumer Price Index (CPI) component for medical care has been used for deflating medical expenditures. This CPI medical care index was until recently constructed from a sample of medical care transactions: a hospital room rate, the price for administering a frequently prescribed medicine, or the charge for a visit to a doctor's office (see Berndt et al., chap. 4 in this volume). Such transactions, which are effectively medical inputs, are sufficiently standardized that the same transaction can be observed repeatedly, which is required for a monthly price index.

The health outcomes of those CPI transactions were never considered explicitly. It is, of course, true that when a consumer paid for an influenza shot, the consumer wanted to reduce the probability of contracting influenza. If an influenza shot that was more effective in preventing influenza became available, a "quality adjustment" would in principle be made in the CPI to allow for the value of the improvement.

In practice, however, such quality adjustments were seldom carried out in the medical care price indexes, for lack of the required information. A quality adjustment in the CPI requires more than just a measure of health care "quality," which may itself be difficult to obtain. The CPI quality adjustment requires valuation, an estimate of "willingness to pay"-what would a consumer be willing to pay for the improved influenza shot, relative to the unimproved one? For health care, the willingness-to-pay question was hard to answer.

Thus, for two reasons, health outcome measures were ignored. First, the primary focus in constructing the price index was on collecting information on transactions, not on medical outcomes. A collection system that focuses on transaction prices for medical inputs does not routinely yield medical outcomes. Second, when improved medical outcomes did come into the picture (in the form of a CPI quality adjustment), it was not the outcome itself but the consumer's willingness to pay that was relevant.

It was widely noted, even thirty-five years ago, that the CPI methodology did not adequately account for improvements in medical care. As the influenza shot example suggests, an improvement in medical procedures that raised the cost of treatment but also improved efficacy frequently showed up as an increase in the CPI. When this CPI was used as a deflator, the improved medical care procedure was thereby inappropriately deflated out of the medical output measure.

Two alternatives to CPI methodology surfaced in the 1960s. The first was the idea of pricing the "cost of a cure," estimating the cost of a medical procedure (the treatment of appendicitis, for example). This contrasted with the CPI's focus on hospital billing elements for a medical procedure, such as the hospital room rate and the administration of a pain medication.

Scitovsky (1964, 1967) estimated cost trends for treating selected medical conditions, including appendicitis and otitis media. She reported that the cost of treating illnesses increased faster than the CPI, a result that most economists found puzzling (because the CPI error that it implied went in the opposite direction from what was expected). Scitovsky suggested that the CPI had understated the rate of medical inflation in the 1950s and 1960s because actual charges had advanced relative to the "customary" charges that presumably went into the CPI.

Scitovsky raised some problems with the cost-of-illness approach that had not previously been considered: What should be done about potential adverse side effects of a new treatment that was better in some respects (or for some care recipients), but worse in others (or for other recipients)? Her example was a new drug treatment for appendicitis that lowered average hospital stay, reduced recovery time, and was far less painful, but increased the chance of a ruptured appendix, with potentially fatal consequences. Though it was not recognized at the time, the Scitovsky study showed that all the outcomes of a medical procedure must be considered, not just any single one, nor just the principal or primary outcome measure. The study said that looking only at the cost of a unidimensional "cure" (appendicitis treatment) without considering the multidimensional attributes or characteristics of a medical procedure could produce its own bias. Though this problem was intractable with the analytic tools that were available in the 1960s, it has been addressed in the cost-effectiveness research of the past ten to fifteen years (see the discussion below).

It is a bit perplexing that, in intervening years since Scitovsky's work, few other estimates of the cost of treating an illness have been made. Cutler et al. (1998), Shapiro and Wilcox (1996), and Frank, Berndt, and Busch (1999) followed Scitovsky by three decades.

As a second alternative to the CPI medical care price index, Reder (1969, 98) proposed to bypass the medical pricing problem altogether by pricing medical insurance: "If medical care is that which can be purchased by means of medical care insurance, then its 'price' varies proportionately with the price of such insurance." Barzel (1969) estimated an insurance measure of medical price inflation, using Blue Cross-Blue Shield plans.

The medical insurance alternative has not been without critics. Feldstein (1969, 141) objected that the cost-of-insurance approach "is almost certain to be biased upward" because "average premiums will rise through time in reflection of the trend toward more comprehensive coverage" and because the insurance plans will purchase "more services or services of higher quality." Moreover, if an epidemic occurred which raised the cost of insurance, it would inappropriately show up as an increase in the cost of medical care, and therefore not an increase in its quantity, unless the medical premium were calculated net of utilization rates. Thus, implementing the insurance alternative requires solving two quality-adjustment problems-adjusting for changes in the quality of medical care and in the quality of insurance plans. Additionally, measuring the output of insurance is conceptually difficult (see Sherwood 1999).

Little empirical work on medical insurance has followed Barzel in the intervening thirty years. Pauly (1999) has recently revived the proposal. He argues that improved methods for measuring willingness to pay make the medical insurance alternative a more attractive option now than it was in the past. In principle, Pauly contends, one could ask how much a consumer would be willing to pay for an insurance policy that covered an expensive medical innovation, compared with one that did not. Weisbrod (1999) noted that no "constant-technology" health insurance contracts exist, no plans promise to pay for yesterday's technology at today's prices, which in itself suggests that the improved technology was worth the increased cost to insurance buyers. Even if the logic of Pauly's proposal suggests an empirical approach, no empirical work exists, so its applicability to measuring medical price and output has not been tested.

As these references from the 1960s suggest, the major issues on health care output were joined years ago. Until recently, debate on measuring the output of the medical sector largely repeated those thirty-year-old arguments. Neither the empirical work nor the data had advanced much beyond the mid-1960s (Newhouse 1989).

Several things have changed recently in the United States. First, the Bureau of Labor Statistics, initially in the Producer Price Index (PPI) and more recently in the CPI, has introduced new medical price indexes that are substantial improvements on what existed before (Catron and Murphy 1996; Berndt et al., chap. 4 in this volume; U.S. Department of Labor 1996). Second, a major new research initiative on health care price indexes, using new approaches and new sources of data, has been created by a research group centered at the National Bureau of Economic Research (these studies are described later). Third, information on health care outcomes has been enhanced greatly by recent research on "cost-effectiveness analysis" within the medical establishment itself (Gold et al. 1996).

A task as yet unexplored is the building of these new price indexes and health outcome measures into an output measure for the medical care sector. The remainder of this paper will develop an approach (which I call the "human repair model"); contrast it with approaches that are used in other parts of national economic accounts and national health accounts; explore the reasons why health care output requires a modification to the measurement conventions typically used for nonmedical services, such as car repair; and, in the last section, present an empirical example of a health account computed from such information.

1.2 The Conceptual Framework for the Human Repair Model

How do we measure the output of nonmedical services in national accounts? Taking as an example car repair, most countries do something like the following. First, one gathers the total expenditure on car repairs (expenditures on brake jobs, water pump and fuel pump replacements, engine overhauls, and so forth). Next, a government statistical agency takes a sample of car repairs (brake jobs and water pump replacements, say); it computes the price change for brake jobs and the price change for water pump replacements, and from these constructs a price index for auto repair. When the price index is used as the deflator for automobile repair expenditures, the result is the (real) expenditures on the output of the auto repair industry (see U.S. Department of Commerce 1989).

Thus, we have

(1) [MATHEMATICAL EXPRESSION NOT REPRODUCIBLE IN ASCII]

(2a) [MATHEMATICAL EXPRESSION NOT REPRODUCIBLE IN ASCII]

(2b) [MATHEMATICAL EXPRESSION NOT REPRODUCIBLE IN ASCII]

= real expenditure on car repair.

The subscript i in these equations refers to individual car repairs (replacing brake pads, for example). Equation (1) is the car repair price index, weighted in principle by the quantities of the different kinds of repairs. The first term on the right-hand side of equation (2a) is the change in expenditure on auto repair, and equation (2b) gives the expression for the change in real output or expenditure on auto repair.

Constructing a measure of health care output can proceed in ways that are in some respects similar to methods used for nonmedical services. That is, we can assemble data on expenditures on treating groups of diseases, such as, for example, expenditures on treating mental conditions or circulatory diseases, or, if more detailed data are available, on treating heart attacks or depression. If we can construct price indexes by disease, then these disease-specific measures of medical inflation can be used as deflators to obtain measures of the real quantity of medical services by disease, in a manner that is described exactly by equations (1)-(2b). In the rest of this paper, this approach to obtaining real output of the medical care sector is called the "human repair model."

There are great advantages to proceeding by the human repair model. However, there are also some necessary differences between human repair and car repair. The following sections highlight some of those differences.

1.2.1 What Is the Output of the Health Care Sector?

When a human repair expenditure is incurred, it must in some sense add to the stock of health, just as car repair adds to the stock of functioning cars. But how should we think about that increment?

There is little disagreement that health is produced by many factors, and not solely by the activities of the medical sector. Diet, lifestyles, environmental factors, genetic endowments, and other influences determine an individual's, or a society's, level of health. It might even be true, as sometimes asserted, that nonmedical influences on health are more important than the medical ones (McKeown 1976; Mokyr 1997).

Medical and nonmedical influences on the "production" of health can be represented in a very general way as

(3) health = H (medical, diet, lifestyle, environmental, genetic, etc.).

"Health" is thus the ultimate output of a "production process" in which medical interventions are one of a number of contributing inputs.

Using equation (3), it is natural to measure the contribution of the health care sector to the production of health by the incremental contribution to health caused by medical interventions. That is,

(4) effectiveness of the health sector = [partial derivative](health)/[partial derivative](medical), other influences constant,

where [partial derivative](health) is the change in health that is attributable to [partial derivative](medical), the incremental resources put into medical care interventions. Equation (4) describes a relation between medical procedures and health, all other influences on health constant.

To do this right, [partial derivative](medical) should include the increments of all the resources required by a medical intervention, which may include direct and indirect costs (unpaid caregiving by the patients family, for example), and [partial derivative](health) should be a comprehensive measure that incorporates all of the effects on health of a medical intervention, including unwanted side effects if any. Equation (4) implies that the health outcomes associated with medical interventions define the output of the health care sector. Let us call this the "medical interventions perspective" on health care output.

(Continues...)

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