The Effect of U.S. Health Insurance Expansions on Medical Innovation

Here’s an interesting recent paper by Jeff Clemens on the effect of health insurance expansions on medical innovation.

Abstract: I study the effect of health insurance expansions on medical innovation. Innovation by practitioners creates important roles for local patient flows and payment systems as drivers of medical technology development. I show that, over the 15 years following Medicare and Medicaid’s passage, U.S.-based medical-equipment patenting rose by nearly 50 percent relative to both other U.S. patenting and foreign medical-equipment patenting. Surges in medical-equipment patenting were largest in the states most significantly affected by the Great Society programs. No surge occurred among pharmaceutical patents, for which markets were not directly affected. Subsequent expansions in insurance against health care costs are also associated with increases in U.S.-based patenting relative to foreign patenting in the relevant areas. The dynamic effect of U.S. insurance expansions may account for 25 percent of recent global medical-equipment innovation and 15 percent of the rise in U.S. health spending in hospitals, physicians’ offices, and other clinical settings from 1960 to 2010. 



About ozidar

I'm an Assistant Professor of Economics at the University of Chicago Booth School of Business and a Faculty Research Fellow at National Bureau of Economic Research. You can follow me on twitter @omzidar.
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2 Responses to The Effect of U.S. Health Insurance Expansions on Medical Innovation

  1. Important, good post.

    If I might run a question by you that I haven’t gotten a good answer for:

    We spend about $100 billion per year on medical research, public and private combined, something of this magnitude (see here).

    We spend about $2 trillion per year on health care delivery, the doctors, hospitals, administration, etc. If we adopted a European style system, cutting our spending per person in half, as in European countries (that I think the evidence shows have about as good or better health care and results anyway; see for example here), then we would save about $1 trillion per year.

    Now, what if we spent that $1 trillion in savings on medical research? It would increase medical research spending more than 10 fold.

    Even if delivery did get a little worse, even if we did get a little bit less of our brightest and best becoming doctors due to lower pay, it seems like this would be totally outweighed over the long run by tremendously more advanced medical understanding and treatments due to the more than 10 fold increase in medical research spending.

    So it looks like if you want better medical results, better treatment, breakthroughs in rejuvenation, better odds of surviving cancer, you name it, you should support going to a European style system, and using the immense savings to increase medical research more than 10 fold.

    So if our health care system really is more efficient than the Europeans, then why…is it possible to make such a vastly favorable trade?


  2. If the Republicans really care about our children and grandchildren so much why don’t they do this, so in 50 years they could have medicine as advanced as it would take perhaps 150 years to achieve with our current system. I don’t care how bad you imagine European health care to be, you cannot think a European medical center of today is less effective than even the Mayo clinic of 100 years ago when penicillin and polio vaccines hadn’t even been invented.

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