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Delivering Health
Cheap Tech, Costly Tech, and You

This is not the health care technology we are looking for. At the Upshot, Austin Frakt notes that, historically, new and better health care technologies have tended to make health care more expensive, not less. But that’s because the field favored the development of certain kinds of medtech:

In an insightful paper published in 1991 in the Journal of Economic Literature, Burton Weisbrod distinguished between two types of health care technologies: those that enhance quality at potentially high cost and those that reduce cost without substantially sacrificing quality. Historically, quality-enhancing but cost-increasing innovations were relatively common, particularly before the managed care era of the 1990s. Studies from the 1980s found that when hospitals competed, they tried to outdo each other on high-cost amenities and technologies rather than reduce prices […]

History also offers examples of cost-reducing health care technology. Some did not degrade quality. For instance, when Medicare reduced payments for kidney dialysis in the mid-1970s, new equipment emerged that halved treatment time, saving labor costs

One sub-class of cost-reducing medtech that Frakt does not mention are innovations that radically change how we deliver care. Those include remote monitoring systems, for example, that can convey accurate, real-time data to doctors, making it easier to catch diseases before they become more expensive to treat. There’s smartphone apps that lower the cost of some care, and consultations with doctors over services like skype or Google Hangout. Dr. Eric Topol, a leading thinker on digital medtech, outlines many more examples here. Investing in those kinds of technologies, instead of the first class of technologies Frakt outlines, must be at the heart of efforts to bend the health-care cost curve.

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  • Kevin

    Actually all this data could increase health care expenses as it becomes useful to have more people who are better trained crunching it to improve outcome.

  • Fat_Man

    I have always been a skeptic of the more medical equipment means more cost meme. It has certainly not been true in other parts of the economy.

    Example one: My wife had a heart condition. A cardiologist fixed it with the most high tech equipment imaginable. The two procedures cost more than $100,000, if the the retail line on the EoB is to be believed. That seems very expensive. But, it is a lot cheaper than some of the alternatives such as open heart surgery or being a semi invalid for 20 years.

    Example two: MRIs modern imaging technology is often demonized as a cost. But, I had a pain in my hip that would not go away. The MRIs showed that the source of the pain was not in my hip, it was in my spine. A few months of physical therapy cured me.

    I think that most of the cost increase attributed to equipment actually comes from other problem areas.

    1. Anti-Competitive behavior. Until my hip problem, MRIs cost $1200 each everywhere in town. Quite coincidentally, a company from out of town arrived in town, and started offerin $400 MRIs just about then.

    2. In house referrals in large practices and clinics, that are made without telling patients that there are alternatives that might be more convenient or less expensive. One of my doctor’s clerks always books me into an affiliated clinic for certain procedures even though it is expensive and even though it is 20 miles from my house in the next county and there are lots of potential providers within 5 miles.

    3. Defensive medicine. I had a shoulder problem. It was diagnosed by examination (the old fashioned way) and fixed by physical therapy. The examining orthopedist wanted me to get an MRI, I asked him if it would make any difference in his diagnosis. He said no, but I wouldn’t wan have missed the remote possibility that you have bone cancer. I said I was willing to run that risk. Since it was 10 years ago, I think I made the right call.

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