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Paying on the Margin for Medical Care: Evidence from Breast Cancer Treatments

Author(s)
Einav, Liran; Finkelstein, Amy; Williams, Heidi L
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Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.

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Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
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Abstract
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. (JEL G22, I11, I13, I18)
Date issued
2016-02
URI
http://hdl.handle.net/1721.1/106819
Department
Massachusetts Institute of Technology. Department of Economics
Journal
American Economic Journal: Economic Policy
Publisher
American Economic Association
Citation
Einav, Liran, Amy Finkelstein, and Heidi Williams. “Paying on the Margin for Medical Care: Evidence from Breast Cancer Treatments.” American Economic Journal: Economic Policy 8.1 (2016): 52–79. © 2016 American Economic Association
Version: Final published version
ISSN
1945-7731
1945-774X

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