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Are quality-adjusted medical prices declining for chronic disease? Evidence from diabetes care in four health systems

Karen Eggleston, Brian K. Chen, Chih-Hung Chen, Ying Isabel Chen, Talitha Feenstra, Toshiaki Iizuka, Janet Tin Kei Lam, Gabriel M. Leung, Jui-fen Rachel Lu, Beatriz Rodriguez-Sanchez, Jeroen N. Struijs, Jianchao Quan () and Joseph Newhouse ()
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Karen Eggleston: Stanford University and NBER
Brian K. Chen: University of South Carolina
Chih-Hung Chen: Chang Gung Memorial Hospital
Ying Isabel Chen: National Taiwan University
Talitha Feenstra: National Institute for Public Health and Environment and University of Groningen
Janet Tin Kei Lam: University of Hong Kong
Gabriel M. Leung: University of Hong Kong
Jui-fen Rachel Lu: Chang Gung University
Beatriz Rodriguez-Sanchez: University of Castilla la Mancha
Jeroen N. Struijs: National Institute for Public Health and Environment and Leiden University Medical Center, Campus The Hague
Jianchao Quan: University of Hong Kong

The European Journal of Health Economics, 2020, vol. 21, issue 5, No 3, 689-702

Abstract: Abstract Improvements in medical treatment have contributed to rising health spending. Yet there is relatively little evidence on whether the spending increase is “worth it” in the sense of producing better health outcomes of commensurate value—a critical question for understanding productivity in the health sector and, as that sector grows, for deriving an accurate quality-adjusted price index for an entire economy. We analyze individual-level panel data on medical spending and health outcomes for 123,548 patients with type 2 diabetes in four health systems: Japan, The Netherlands, Hong Kong and Taiwan. Using a “cost-of-living” method that measures value based on improved survival, we find a positive net value of diabetes care: the value of improved survival outweighs the added costs of care in each of the four health systems. This finding is robust to accounting for selective survival, end-of-life spending, and a range of values for a life-year or fraction of benefits attributable to medical care. Since the estimates do not include the value from improved quality of life, they are conservative. We, therefore, conclude that the increase in medical spending for management of diabetes is offset by an increase in quality.

Keywords: Productivity; Quality adjustment; Health expenditures; Medical spending; Net value (search for similar items in EconPapers)
JEL-codes: I10 I18 H51 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s10198-020-01164-1

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