Are Health Care Prices Rising When Adjusted for Outcomes? Evidence from Heart Attack Treatments in Ontario

Abstract

Increase in medical spending is an issue in all the developed countries and particularly in Canada. However, given that medical technology is evolving rapidly, we do not know whether price or quantity/quality of services is responsible for more of this increase. The objective of this study is to address the issue of measuring health care price in Canada. We estimate two types of price indices: a service price index (SPI), which prices specific medical services without any adjustment for health outcomes, and a cost-of-living index (COLI), which measures an outcome- adjusted cost of treating a specific health problem. These indices are applied to Acute Myocardial Infarction (AMI - or heart attack) treatment for the period 1995/96 and 2001/02, with cost data provided by the Ontario Case Costing Initiative (OCCI) and mortality data obtained from the Discharge Abstract Database. While we estimate a positive real annual change in AMI treatment price for the SPI, the real COLI fell about 1.0 percent per year under our benchmark assumption on the value of life, without even considering the quality of life of AMI patients.