American Economic Journal

The pragmatist’s guide to comparative effectiveness research

The Journal of Economic Perspectives: a journal of the American Economic Association
Chandra A, Jena AB, Skinner JS

All developed countries have been struggling with a trend toward health care absorbing an ever-larger fraction of government and private budgets. One potential solution is to rely more heavily on studies of the costs and effectiveness of new technologies in an effort to ensure that new spending is justified by a commensurate gain in consumer benefits. For most nonhealth commodities, markets function sufficiently well to perform this function unassisted. But in a market such as health care, effectiveness studies can (in theory) shed light on what patients would have demanded in the absence of moral hazard and adverse selection.

Physician Beliefs and Patient Preferences: A New Look at Regional Variation in Health Care Spending

American Economic Journal
David Cutler, Jonathan S. Skinner, Ariel Dora Stern, and David Wennberg*

There is considerable controversy about the causes of regional variations in health care expenditures. Using vignettes from patient and physician surveys linked to fee-for-service Medicare expenditures, this study asks whether patient demand-side factors or physician supply-side factors explain these variations. The results indicate that patient demand is relatively unimportant in explaining variations. Physician organizational factors matter, but the most important factor is physician beliefs about treatment. In Medicare, we estimate that 35 percent of spending for end-of-life care and 12 percent of spending for heart attack patients (and for all enrollees) is associated with physician beliefs unsupported by clinical evidence. (JEL D83, H75, I11, I18)

READ MORE