City Research Online

Abstract

The effect of insurance expansion on the diffusion of new technologies is not a well-understood phenomenon. Arguably, an expansion of insurance coverage provides a motivation for R&D investment in medical technologies. Although risk pooling through insurance gives rise to greater affordability for existing treatments and becomes a volume driver of new treatments, it may also influence provider reimbursement through a monopsony purchaser effect and related cost control measures. However the impact that insurance has on technology availability and R&D investment, and more generally on the adoption of new technologies remains an unexplored empirical question. This paper presents evidence of a link between insurance and technology diffusion using OECD panel data and taking advantage of a dynamic specification structure. Our empirical estimates indicate that higher degrees of private expenditure on health care correlate with higher levels of R&D in health care, consistent with the hypothesis forwarded by Weisbrod that increasing insurance coverage gives boosts technology adoption. However our findings also suggest that increasing public funding of health care appears to lower technological adoption, which is, of course, consistent with the exercising of monopsony power and an objective of cost containment.

Publication Type:	Article
Additional Information:	This is a post-peer-review, pre-copyedit version of an article published in The Geneva Papers on Risk and Insurance - Issues and Practice. The definitive publisher-authenticated version Costa-Font, J., McGuire, A., & Serra-Sastre, V. (2012). The “Weisbrod Quadrilemma” revisited: insurance incentives on new health technologies. The Geneva Papers on Risk and Insurance-Issues and Practice, 37(4), 678-695. is available online at: http://dx.doi.org/10.1057/gpp.2012.37
Publisher Keywords:	insurance, technology diffusion, health technologies.
Subjects:	H Social Sciences > HG Finance R Medicine > RA Public aspects of medicine
Departments:	School of Policy & Global Affairs > Economics
Related URLs:	Author
SWORD Depositor:	Symplectic Administrator

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