Quantifying the Super-Villains

 [[{“value”:”There is a new paper on this topic: We investigate the effects of substantial Medicare price reductions in the medicaldevice industry, which amounted to a 61% decrease over 10 years for certain devicetypes. Analyzing over 20 years of administrative and proprietary data, we find theseprice cuts led to a 25% decline in new product introductions
The post Quantifying the Super-Villains appeared first on Marginal REVOLUTION.”}]] 

There is a new paper on this topic:

We investigate the effects of substantial Medicare price reductions in the medicaldevice industry, which amounted to a 61% decrease over 10 years for certain devicetypes. Analyzing over 20 years of administrative and proprietary data, we find theseprice cuts led to a 25% decline in new product introductions and a 75% decrease inpatent filings, indicating significant reductions in innovation activity. Manufacturersdecreased market entry and increased outsourcing to foreign producers, associatedwith higher rates of product defects. Our calculations suggest the value of lost inno-vation may fully offset the direct cost savings from the price cuts. We propose thatbetter-targeted pricing reforms could mitigate these negative effects. These findingsunderscore the need to balance cost containment with incentives for innovation andquality in policy design.

By Yunan Ji and Parker Rogers.  Here is a summary tweet storm.  Via Sam Hammond.

The post Quantifying the Super-Villains appeared first on Marginal REVOLUTION.

 Economics, Medicine, Uncategorized