Estimating Marginal Returns to Medical Care: Evidence from At-Risk Newborns
We estimate marginal returns to medical care for at-risk newborns by comparing health outcomes and medical treatment provision on either side of common risk classifications, most notably the "very low birth weight" threshold at 1500 grams. First, using data on the census of US births in available years from 1983-2002, we find evidence that newborns with birth weights just below 1500 grams have lower one-year mortality rates than do newborns with birth weights just above this cutoff, even though mortality risk tends to decrease with birth weight. One-year mortality falls by approximately one percentage point as birth weight crosses 1500 grams from above, which is large relative to mean one-year mortality of 5.5% just above 1500 grams. Second, using hospital discharge records for births in five states in available years from 1991-2006, we find evidence that newborns with birth weights just below 1500 grams have discontinuously higher costs and frequencies of specific medical inputs. We estimate a $4,000 increase in hospital costs as birth weight approaches 1500 grams from above, relative to mean hospital costs of $40,000 just above 1500 grams. Taken together, these estimates suggest that the cost of saving a statistical life of a newborn with birth weight near 1500 grams is on the order of $550,000 in 2006 dollars.
We are very grateful to Christine Pal and Jean Roth for assistance with the data, to Christopher Afendulis and Ciaran Phibbs for sharing the California neonatal intensive care unit data, and to Drs. Chris Almond, Burak Alsan, Munish Gupta, Chafen Hart, and Katherine Metcalf for helpful discussions regarding neonatology. David Autor, Amitabh Chandra, David Cutler, Dan Fetter, Amy Finkelstein, Edward Glaeser, Michael Greenstone, Jonathan Gruber, Jerry Hausman, Guido Imbens, Lawrence Katz, Michael Kremer, Ellen Meara, Derek Neal, Joseph Newhouse, James Poterba, Gary Solon, Tavneet Suri, and participants in seminars at Harvard, the Harvard School of Public Health, MIT, and the fall 2008 NBER Labor Studies meeting provided helpful comments and feedback. We use discharge data from the Healthcare Cost and Utilization Project (HCUP), Agency for Healthcare Research and Quality, provided by the Arizona Department of Health Services, Maryland Health Services Cost Review Commission, New Jersey Department of Health and Senior Services, and the New York State Department of Health. Funding from the National Institute on Aging, Grant Number T32-AG000186 to the National Bureau of Economic Research, is gratefully acknowledged (Doyle, Kowalski, Williams). The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
Douglas Almond & Joseph J. Doyle & Amanda E. Kowalski & Heidi Williams, 2010. "Estimating Marginal Returns to Medical Care: Evidence from At-risk Newborns," The Quarterly Journal of Economics, Oxford University Press, vol. 125(2), pages 591-634. citation courtesy of