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

Jeffrey Clemens

No 11-016, Discussion Papers from Stanford Institute for Economic Policy Research

Abstract: I study the effect of health insurance expansions on medical innovation. Practitioner dominated innovation (Roberts, 1988) creates an important role for the incentives in “local” payment systems as drivers of medical technology development. I show that, over the 15 years following Medicare and Medicaid’s passage, U.S.-based patenting shifted towards medical equipment by nearly 1.5 percentage points (50 percent) more than foreign patenting. This did not reflect a more general, U.S.-specific trend towards health-sector innovation; no such increase occurred among pharmaceutical patents, the markets for which were unaffected. Subsequent decreases in cost-sharing for all health spending are also associated with increases in U.S.-based patenting relative to foreign patenting in the relevant areas. Back-of-the-envelope calculations suggest that the dynamic effect of U.S. insurance expansions may account for around 25 percent of 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.

JEL-codes: H51 I11 I13 O31 O38 (search for similar items in EconPapers)
Date: 2012-06
New Economics Papers: this item is included in nep-hea, nep-ias, nep-ino, nep-ipr and nep-pr~
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Citations: View citations in EconPapers (20)

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Working Paper: The Effect of U.S. Health Insurance Expansions on Medical Innovation (2013)
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