Public Liabilities and Health Care Policy

TLDR: This analysis suggests that cutbacks in government programs may raise government liabilities and expansions may lower them, and quantitatively calibrates these non-standard effects for the US Medicare program.

Abstract: Many countries have large future public liabilities attributable to health care programs However, little explicit analysis exists about how health care policies affect these program liabilities We analyze how reimbursement and approval policies affect public liabilities through their impact on the returns to medical innovation, a central factor driving spending growth We consider how policies impact innovative returns through expected earnings, their risk-adjustment, and their timing and defaults through the approval process Our analysis implies that cutbacks in government programs may raise government liabilities and expansions may lower them We quantitatively calibrate these non-standard effects for the US Medicare program