The Role of Technology in Rising Health Care Costs. What Should or Shouldn’t Be Done.

Topics: Health economics, Health care, Medicine Pages: 14 (5116 words) Published: April 23, 2011
The Role of Technology in Rising Health Care Costs. What should or shouldn’t be done.


Health care costs are a longstanding concern to policymakers. For years, health care spending has been rising faster than the rate of economic growth, raising the question of what factors are responsible for rising health care costs. This paper explores published articles that report results from research conducted on technological innovations in health care and its relation to rising health care costs. The cost increases have a significant effect on households, businesses, and government programs. Health care experts indicates the development and diffusion of medical technology as primary factors in explaining the persistent difference between health spending and overall economic growth, with some arguing that new medical technology may account for about one-half or more of real long-term spending growth. Rising health care expenditures lead to the question of whether we are getting value for the money we spend. On an average, increases in medical spending as a result of advances in medical care have provided reasonable value. An alternative viewpoint holds that although new technologies represent medical advances, they are prone to overuse and thereby excess cost. Most of the suggestions to slow the growth in new medical technology in the U.S. focus on cost-effectiveness analysis. However, there are other issues that include, whether money would be saved by reducing costly technology where marginal value is low and how to monitor the cost impact and whether a cost containment approach would discourage technological innovation.

The Role of Technology in Rising Health Care Costs.
What should or shouldn’t be done.

For nearly all of the past four decades, spending on health care in the United States grew more rapidly than the economy. As a result, the share of national income devoted to health care nearly tripled. This ongoing spending growth pervaded all parts of the health system— including the nation’s public insurance programs. Although many factors contributed to that growth, most analysts have concluded that the bulk of the long-term rise resulted from the health care system’s use of new medical services that were made possible by technological advances, or what some analysts term the “increased capabilities of medicine.” Major advances in medical science have allowed health care providers to diagnose and treat illness in ways that were previously impossible. Many new services are very costly; others are relatively inexpensive but raise aggregate costs quickly as ever-growing numbers of patients use them. Technological innovation can theoretically reduce costs and, for many types of goods and services, often does. Historically, however, the nature of technological advances in medicine and the changes in clinical practice that followed them have tended to raise the spending. Growth in Spending on Health Care.

Health care costs have been rising for several years. Borger et al.1 found that expenditure in the United States on health care surpassed $1.9 trillion in 2004, more than three times the $696 billion spent in 1990, and over eight times the $ 245.8 billion spent in 1980. In 2004, U.S. health care spending was about $6280 per resident and accounted for 16.0 % of the nation’s Gross Domestic Product (GDP); this is among the highest of all industrialized countries. Total health care expenditures grew at an annual rate of 8.4 % in 2004, a slower rate than recent years, yet still outpacing inflation and the growth in national income. If the current trend in health care spending continues, health costs are likely to continue to rise in the foreseeable future. Federal estimates are that health care spending will increase more than double between 2004 and 2014, and by 2015 will consume 20% of the GDP. According to Thorpe et al.,2 nominal health care spending among the non-institutionalized population increased...

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