Uncertainty and Technological Change in Medicine

Uncertainty and Technological Change in Medicine Page 913 Annetine C. Gelijns, Joshua Graff Zivin, Richard R. Nelson Columbia University At the heart of Kenneth Arrow’s landmark article on the economics of medical care is the pervasive influence of uncertainty, both in regard to the occurrence of disease and to the efficacy of treatment. These uncertainties, as Arrow contends, have led to the following distortions in the operation of health care: (1) health insurance schemes that have insulated patients and physicians from the financial implications of their medical decisions (i.e., the moral hazard argument), and (2) delegation of medical care decisions from patients to physicians because of the extreme information asymmetry between the two parties (the principal agent theory). These arguments are made with little reference to technology or technological change, issues that Arrow explores in numerous other works (1962, 1969). Yet these issues of moral hazard and agency provide a significant thrust behind technological development in medicine. In the past forty years, physicians have faced strong clinical, economic, and social incentives to adopt and use new technologies in management of disease. The insulation of patients from true medical costs through insurance has compounded these effects. The growth of insurance has led to strong, positive http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Health Politics, Policy and Law Duke University Press

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Publisher
Duke University Press
Copyright
Copyright 2001 by Duke University Press
ISSN
0361-6878
eISSN
1527-1927
D.O.I.
10.1215/03616878-26-5-913
Publisher site
See Article on Publisher Site

Abstract

Page 913 Annetine C. Gelijns, Joshua Graff Zivin, Richard R. Nelson Columbia University At the heart of Kenneth Arrow’s landmark article on the economics of medical care is the pervasive influence of uncertainty, both in regard to the occurrence of disease and to the efficacy of treatment. These uncertainties, as Arrow contends, have led to the following distortions in the operation of health care: (1) health insurance schemes that have insulated patients and physicians from the financial implications of their medical decisions (i.e., the moral hazard argument), and (2) delegation of medical care decisions from patients to physicians because of the extreme information asymmetry between the two parties (the principal agent theory). These arguments are made with little reference to technology or technological change, issues that Arrow explores in numerous other works (1962, 1969). Yet these issues of moral hazard and agency provide a significant thrust behind technological development in medicine. In the past forty years, physicians have faced strong clinical, economic, and social incentives to adopt and use new technologies in management of disease. The insulation of patients from true medical costs through insurance has compounded these effects. The growth of insurance has led to strong, positive

Journal

Journal of Health Politics, Policy and LawDuke University Press

Published: Oct 1, 2001

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