NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Are Medical Prices Declining?

David M. Cutler, Mark McClellan, Joseph P. Newhouse, Dahlia Remler

NBER Working Paper No. 5750
Issued in September 1996
NBER Program(s):   AG   PR   PE

We address long-standing problems in measuring health care prices by estimating two medical care price indices. The first, a Service Price Index, prices specific medical services, as does the current CPI. The second, a Cost of Living Index, measures the net valuation of treating a health problem. We apply these indices to heart attack treatment between 1983 and 1994. Because of technological change and increasing price discounts, the current CPI overstates a chain-weighted price index by three percentage points annually. For plausible values of an additional life-year, the real Cost of Living Index fell about 1 percent annually.

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Document Object Identifier (DOI): 10.3386/w5750

Published: Published as "Are Medical Prices Declining? Evidence for Heart Attack Treatments", Quarterly Journal of Economics, Vol. 108, no. 4 (November 1998).

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