NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Public Liabilities and Health Care Policy

Kristopher J. Hult, Tomas J. Philipson

NBER Working Paper No. 18571
Issued in November 2012, Revised in May 2013
NBER Program(s):Health Care

Many countries have large future public liabilities attributable to health care programs. However, little explicit analysis exists about how health care policies affect these program liabilities. We analyze how reimbursement and approval policies affect public liabilities through their impact on the returns to medical innovation, a central factor driving spending growth. We consider how policies impact innovative returns through expected earnings, their risk-adjustment, and their timing and defaults through the approval process. Our analysis implies that cutbacks in government programs may raise government liabilities and expansions may lower them. We quantitatively calibrate these non-standard effects for the US Medicare program.

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Document Object Identifier (DOI): 10.3386/w18571

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