It’s my inclination to be drawn to studies showing that we waste money on medical care. This is probably because the fact that so much medical care has no impact, or worse, on actual health outcomes is a underappreciated and counterintuitive truth than the fact that some medical care has benefits that exceed costs. Even after reading many of them, marginal studies showing the former are still always more interesting to me than the latter. But it’s important to focus as well on studies that demonstrate places where medical care has real value.

In this vein, an abstract from a new paper in The Quarterly Journal of Economics has really stuck with me all week for it’s empirical ingenuity and it’s results:

A key policy question is whether the benefits of additional medical expenditures exceed their costs. We propose a new approach for estimating marginal returns to medical spending based on variation in medical inputs generated by diagnostic thresholds. Specifically, we combine regression discontinuity estimates that compare health outcomes and medical treatment provision for newborns on either side of the very low birth weight threshold at 1,500 grams… Under an assumption that observed medical spending fully captures the impact of the “very low birth weight” designation on mortality, our estimates suggest that the cost of saving a statistical life of a newborn with birth weight near 1,500 grams is on the order of $550,000 in 2006 dollars.


ADDENDUM: See Mark Thoma in the comments. The paper’s results may actually be spurious. So much for some good news.

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