Wednesday, September 11, 2013

Technology and health care costs

I have blogged recently about how the recent wave of consolidation among health care providers in the has contributed to escalation of health care costs. The mis-aligned incentives among stakeholders - patients and doctors who do not see the prices, hospitals who charge as they like, insurers who pass on the cost to employers, and employers who pass on to employees by restraining pay rises - feeds the upward spiral. Health care costs have been rising in the US faster than elsewhere.

Another contributor to the high costs is technology. The US has been at the cutting edge of advances in health care technology, many of whose benefits are minimal and are not supported by much evidence. In a recent article, MIT Professor Jonathan Skinner wrote about such treatments,
These include expensive surgical treatments like spinal fusion for back pain, proton-beam accelerators to treat prostate cancer, or aggressive treatments for an 85-year-old patient with advanced heart failure. The prevailing evidence suggests no known medical value for any of these compared with cheaper alternatives. Yet if a hospital builds a $150 million proton accelerator, it will have every incentive to use it as frequently as possible, damn the evidence. And hospitals are loading up on such technology; the number of proton-beam accelerators in the United States is increasingly rapidly. 
High tech but limited value treatments may be playing a role in driving up health care costs. It will be interesting to investigate empirically and find out its contribution to the rise in aggregate health care costs.  

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