Quality Adjustment for Health Care Spending on Chronic Disease: Evidence from Diabetes Treatment, 1999-2009

Although U.S. health care expenditures reached 17.6 percent of GDP in 2009, quality measurement in this important service sector remains limited. Studying quality changes associated with 11 years of health care for patients with diabetes, the authors find that the value of reduced mortality and avoided treatment spending, net of the increase in annual spending, was $9,094 for the average patient. These results suggest that the unit cost of diabetes treatment, adjusting for the value of health outcomes, has been roughly constant. Since input prices have not been declining, our results are consistent with productivity improvement in health care.