One of the thorniest problems in health care is that new medical technologies often raise costs. Other industries have been able to dramatically lower costs by adopting new technologies, but health care gets more expensive every year as hospitals adopt new treatments and surgical tools.
Economist Jonathan Skinner thinks this “costly paradox of health-care technology” traces to two sources. Technology Review:
The first is a dizzying array of different treatments, some that provide enormous health value per dollar spent and some that provide little or no value. The second is a generous system of insurance (both private and public) that pays for any treatment that doesn’t obviously harm the patient, regardless of how effective it is […]
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.
It’s important to distinguish here between different kinds of medical technology. There’s the kind of new treatment innovations that are adding more costs on to our system, just as Skinner says. But increasingly we’re also seeing different kinds of medical technology take off: those that are more about data manipulation and care distribution than about treatment itself. E-vists, smartphone apps, at-home diagnostic tool—these kinds of technology have the potential to dramatically lower costs. One thing holding back these innovations is that care providers seem slow to adopt new digital platforms, as a 2013 study by Wego Health shows.
But, even if hospitals and providers catch up with big data and smartphone technology, won’t things like proton accelerators keep driving up costs anyway? Skinner has some solutions to this problem, but this seems to us another area in which more robust price signals and consumer power could do a lot of good. While some people will always opt for every possible treatment, especially in end of life situations, price-consciousness consumers are in general more careful about the kind of unnecessary care they seek. Restrained demand for exotic but unproven treatments would hold down costs as new digital technologies create a deeper transformation of the system.
[Hospital technology image courtesy of Shutterstock]