Paying on the Margin for Medical Care: Evidence from Breast Cancer Treatments
We present a simple graphical framework to illustrate the potential welfare gains from a “top-up” health insurance policy requiring patients to pay the incremental price for more expensive treatment options. We apply this framework to breast cancer treatments, where lumpectomy with radiation therapy is more expensive than mastectomy but generates similar average health benefits. We estimate the relative demand for lumpectomy using variation in distance to the nearest radiation facility, and estimate that the “top-up” policy increases social welfare by $700-2,500 per patient relative to two common alternatives. We briefly discuss additional tradeoffs that arise from an ex-ante perspective.
We are grateful to Dan Silverman, three anonymous referees, Jon Gruber, Jon Skinner, and Doug Staiger for helpful comments, to Yufei Wu for excellent research assistance, and to the National Institute on Aging (Einav and Finkelstein, R01-AG032449) and National Science Foundation (Williams, 1151497) for financial support. The collection of the cancer incidence data used in this study was supported by the California Department of Public Health as part of the statewide cancer reporting program mandated by California Health and Safety Code Section 103885; the National Cancer Institute’s Surveillance, Epidemiology and End Results Program under contract HHSN261201000140C awarded to the Cancer Prevention Institute of California, contract HHSN261201000035C awarded to the University of Southern California, and contract HHSN261201000034C awarded to the Public Health Institute; and the Centers for Disease Control and Prevention’s National Program of Cancer Registries, under agreement U58DP003862-01 awarded to the California Department of Public Health. The ideas and opinions expressed herein are those of the authors and endorsement by the State of California Department of Public Health, the National Cancer Institute, and the Centers for Disease Control and Prevention or their Contractors and Subcontractors is not intended nor should be inferred. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
I am a member of the Congressional Budget Office’s Panel of Health Advisers
Liran Einav & Amy Finkelstein & Heidi Williams, 2016. "Paying on the Margin for Medical Care: Evidence from Breast Cancer Treatments," American Economic Journal: Economic Policy, American Economic Association, vol. 8(1), pages 52-79, February. citation courtesy of