Medical Technology Costs: Cause and Solution

Reading recent interpretations of “Value-Based Purchasing for Medical Devices“, it is not surprising to see, once again, the conclusion that medical technology is a significant source of rising healthcare costs.

We all need to think outside envelope, though.  Medical technology drives costs but also provides solutions we cannot resist.

The tendency of healthcare cost analyses is to treat medical technology costs as something that cannot be assessed directly, so they are either treated as a “residual” where all other unattributable costs are dumped or are measured indirectly by measuring, for example, “health care research and development spending as a proxy for technological change”. These arguments are put forth, even while coincidentally noting that technology can be made a convenient scapegoat (“the role of increasing rates of obesity has not been studied until recently, so some of its impact on spending may have inadvertently been attributed to technology”). It is indeed true that healthcare costs are driven up by medical technology.  However, it is equally undeniable that the a priori motivation for new medical technology is to improve upon existing diagnostic or treatment options.  Medical technology companies are perennially seeking to do one of the following:

  1. displace existing market share / penetrate existing markets
  2. tap into untapped demand for treatments where none, or few effective, exist currently

If we consider medical technology and treat it analogously to other types of technology, the comparison reveals that the bias against medical technology ensues from a lack of understanding in healthcare demand. One could make the argrument, for example, that the costs of consumer electronics — HDTVs, plasma screen TVs, for example — is being driven by technology, but no one would make this a focus since there is a demand variable in consumer electronics.  But, because medical technology is perpetually faced by untapped or incompletely satisfied demand, there is only one way to criticize medical technology — the cost is too high for the value received. The more salient way this is addressed is in considering the following, from Cutler and McCellan (Cutler DM, McClellan M. “Is Technological Change in Medicine Worth It?” Health Affairs, vol. 20, no. 5, September/October 2001.):

Treatment expansion occurs when treatment becomes more attractive to patients because of either better outcomes or reduced pain or disability connected with treatment. Treatment expansion almost always increases spending (some preventive services would be exceptions, although most effective preventive services increase spending (70)). Treatment substitutions that decrease costs often stimulate large treatment expansions, since lower unit costs often go along with reductions in pain and disability, as with cataract surgery and minimally invasive gall bladder surgery.

Because medical technology is imperfect in the sense that it treats symptoms (does not cure) and most every (at least intended) improvement in technology is made to better serve demand and but also typically costs more than existing technology, even if it results in lower longer term costs, medical technology will always be a principal driver of higher healthcare costs.  To use another analogy, fighting the recreational “drug war”  in the U.S. is futile without addressing the underlying demand. The argument needs to move away from this myopic view and toward discourse that recongizes healthcare demand as a prime driver of healthcare costs. If, as you may have suspected, this blog was going to lead to an answer to this question, I apologize for in any way implying this.  The answer is not easy.  Disease, trauma and death have never been easy questions. 

We have no choice, with limited resources, but to try to assess the cost/value relationship, but we can no more look at medical technology costs without considering demand than we can look at any microeconomic system without demand as a variable.   In the end, medical technology is neither and both the cause and the solution to rising healthcare costs.  

To consider medical technology costs with any more narrow perspective will result in bad (expensive) policy decisions.

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