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American Economic Review: Vol. 101 No. 3 (May 2011)

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Are Drugs Substitutes or Complements for Intensive (and Expensive) Medical Treatment

Article Citation

Zhang, Yuting, Joseph P. Newhouse, and Katherine Baicker. 2011. "Are Drugs Substitutes or Complements for Intensive (and Expensive) Medical Treatment." American Economic Review, 101(3): 393-97.

DOI: 10.1257/aer.101.3.393

Abstract

Little is known about the relationship between variation in drug and non-drug medical treatment and how areas may substitute one type of care for the other. Using pharmacy and medical claims data for Medicare beneficiaries, we examine whether areas with more drug use have lower non-drug medical costs and how the quality of prescribing and primary care are associated with medical costs. We find that areas with higher drug spending do not have lower non-drug medical spending; however, poorer-quality prescribing and primary care are associated with higher medical spending in general and inpatient spending in particular.

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Authors

Zhang, Yuting (U Pittsburgh)
Newhouse, Joseph P. (Harvard U)
Baicker, Katherine (Harvard U)

JEL Classifications

D12: Consumer Economics: Empirical Analysis
I11: Analysis of Health Care Markets
I18: Health: Government Policy; Regulation; Public Health


American Economic Review


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