NCPA - National Center for Policy Analysis


November 21, 2006

Frank Lichtenberg of the National Bureau of Economic Research examined the effect of the introduction of new laboratory procedures and other medical goods and services on the health of Americans during the period 1990-2003. 

He finds that medical conditions with higher rates of innovation in lab procedures and outpatient drugs experienced larger increases in the mean age at death, after controlling for other medical innovation rates and the initial mean age at death:

  • The increase in mean age at death attributable to the use of new lab procedures between 1990 and 1998 is estimated to be about 6 months.
  • This represents 42 percent of the total increase in mean age at death (1.18 years) in the sample of diseases studied here.
  • The new laboratory procedures introduced during 1990-8 are estimated to have saved 1.13 million life-years in 1998.
  • The expenditure per life-year gained from the new lab procedures is estimated to be $6,093, so, treatments that cost this amount generally are considered to be cost-effective.

The 1998 data used here come from 92 firms.  The people covered by these firms' health plans used about 22 million outpatient and inpatient lab, surgical, drug and diagnostic radiology procedures:

  • The total cost of these procedures was $1.94 billion.
  • The average cost of new lab procedures was only $1 higher than the average cost of old lab procedures ($24).
  • For other types of procedures, the average cost of new procedures was anywhere from 1.8 to 11 times higher than the average cost of the old procedures.
  • Lab procedures accounted for 60 percent of the total number of procedures performed, but for only 17 percent of the total expenditure on these procedures.

Source: Les Picker, "New Laboratory Procedures Increase Life Expectancy," NBER Digest, November 2006; based upon: Frank R. Lichtenberg, "The Impact of New Laboratory Procedures and Other Medical Innovations on the Health of Americans, 1990-2003: Evidence from Longitudinal, Disease-Level Data," National Bureau of Economic Research, Working Paper No. 12120, March 2006.

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