 The insurance value of medical innovationDarius Lakdawalla, Anup Malani and Julian Reif Journal of Public Economics, 2017, vol. 145, issue C, 94-102 Abstract: Economists think of medical innovation as a valuable but risky good, producing health benefits but increasing financial risk for consumers and healthcare payers. This perspective overlooks how innovation can lower physical risks borne by healthy patients facing the prospect of future disease. We present an alternative framework that accounts for all these sources of value and links them to the value of healthcare insurance. We show that any innovation worth buying reduces overall risk and generates positive insurance value on its own. We conduct a stylized numerical exercise to assess the potential empirical significance of our insights. Our calculations suggest that conventional methods meaningfully understate the value of historical health gains and disproportionately undervalue treatments for the most severe illnesses, where physical risk to consumers is the costliest. These calculations also suggest that the value of physical insurance from new technologies may exceed the financial spending risk that they pose. Keywords: Cost-benefit analysis; Health insurance; Medical innovation; Value of health (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:145:y:2017:i:c:p:94-102 DOI: 10.1016/j.jpubeco.2016.11.012 Access Statistics for this article Journal of Public Economics is currently edited by R. Boadway and J. Poterba More articles in Journal of Public Economics from Elsevier |
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