TY - JOUR AU - Cutler,David M. AU - McClellan,Mark AU - Newhouse,Joseph P. AU - Remler,Dahlia TI - Pricing Heart Attack Treatments JF - National Bureau of Economic Research Working Paper Series VL - No. 7089 PY - 1999 Y2 - April 1999 UR - http://www.nber.org/papers/w7089 L1 - http://www.nber.org/papers/w7089.pdf N1 - Author contact info: David M. Cutler Department of Economics Harvard University 1875 Cambridge Street Cambridge, MA 02138 Tel: 617/496-5216 Fax: 617/496-8951 E-Mail: dcutler@harvard.edu Mark B. McClellan Director, Engelberg Center for Health Care Reform Senior Fellow, Economic Studies Leonard .D. Schaeffer Director's Chair in Health Policy ,The Brookings Institution 1775 Massachusetts avenue, N.W. Washington, DC 20036 Tel: (202) 741-6567 Fax: NA E-Mail: mmcclellan@brookings.edu Joseph P. Newhouse Division of Health Policy Research and Education Harvard University 180 Longwood Avenue Boston, MA 02115-5899 Tel: 617/432-1325 Fax: 617/432-3503 E-Mail: newhouse@hcp.med.harvard.edu Dahlia K. Remler School of Public Affairs Baruch College City University of New York One Bernard Baruch Way Box D-901 New York, NY 10010 Tel: 646/660-6725 Fax: 646/660-6701 E-Mail: Dahlia.Remler@baruch.cuny.edu M1 - published as David M. Cutler, Mark B. McClellan, Joseph P. Newhouse, Dahlia K. Remler. "Pricing Heart Attack Treatments," in David M. Cutler and Ernst R. Berndt, editors, "Medical Care Output and Productivity" University of Chicago Press (2001) AB - In this paper, we estimate price indices for heart attack treatments, demonstrating the techniques that are currently used in official price indices and presenting some alternatives. We consider two types of price indices, a Service Price Index, which prices specific treatments provided, and a Cost of Living Index, which prices the health outcomes of patients. Both indices are complicated by price measurement issues: list prices and transactions prices are fundamentally different in the medical care field. The development of new or modified medical treatments further complicates the comparison of like' goods over time. And the Cost of Living Index is hampered by the need to determine how much of health improvement results from medical treatments in comparison to other factors. We describe methods to address each of these obstacles. We conclude that whereas traditional price indices when applied to heart attack treatments are rising at roughly 3 percent per year above general inflation, a corrected service price index is rising at perhaps 1 to 2 percent per year above general inflation, and the cost of living index is falling by 1 to 2 percent per year relative to general inflation. We discuss the implications of these results for official price index calculations. ER -