  This study provides new evidence regarding the extent to which medical care
mitigates the economic consequences of various health shocks for the individual
and a wider family. To obtain causal effects, I focus on the role of medical
scientific discoveries and leverage the longitudinal dimension of unique
administrative data for Sweden. The results indicate that medical innovations
strongly mitigate the negative economic consequences of a health shock for the
individual and create spillovers to relatives. Such mitigating effects are
highly heterogeneous across prognoses. These results suggest that medical
innovation substantially reduces the burden of welfare costs yet produces
income inequalities.
