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A longstanding literature has highlighted the tension between the altruism of physicians and their desire for profit. This paper develops new implications for how these competing forces drive pricing and utilization in healthcare markets. Altruism dictates that providers reduce utilization in response to higher prices, but profit-maximization does the opposite. Rational physicians will behave more altruistically when treating poorer patients or those that face higher medical cost burdens, and when foregone profits are lower. These insights help explain the observed heterogeneity in pricing dynamics across different healthcare markets. We empirically test the implications of our model by utilizing two exogenous shocks in Medicare price setting policies. Our results indicate that patient income, out-of-pocket costs, and profitability alone explain up to one-quarter of the variation in price elasticities. Finally, we demonstrate that uniform policy changes in reimbursement or patient cost-sharing may lead to unintended consequences.

Zonder onderwerpscode: economie

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For decades, the US public and private sectors have committed substantial resources towards cancer research, but the societal payoff has not been well-understood. We quantify the value of recent gains in cancer survival, and analyze the distribution of value among various stakeholders. Between 1988 and 2000, life expectancy for cancer patients increased by roughly four years, and the average willingness-to-pay for these survival gains was roughly $322,000. Improvements in cancer survival during this period created 23 million additional life-years and roughly $1.9 trillion of additional social value, implying that the average life-year was worth approximately $82,000 to its recipient. Health care providers and pharmaceutical companies appropriated 5-19% of this total, with the rest accruing to patients. The share of value flowing to patients has been rising over time. These calculations suggest that from the patient's point of view, the rate of return to R&D investments against cancer has been substantial.

Zonder onderwerpscode: economie