Bend The Healthcare Cost Curve Downward By Letting Healthcare Costs Rise – Pacific Research Institute

Bend The Healthcare Cost Curve Downward By Letting Healthcare Costs Rise

Earlier this year, a team of researchers in Europe decided to examine the relationship between cutting-edge technology and healthcare costs.

Some wonks complain that expensive new medical technologies and therapies — some of which deliver only marginal improvements to patient health — are key drivers of health spending.

But when the European researchers surveyed 86 studies on the subject, they found that while some innovations raised health costs, others reduced them. The relationship, they concluded, “is complex and often conflicting.”

Policymakers tend to focus on the six-figure price tag of a new drug or technology. But they ignore the long-term value that medical innovations can bring — for both patients and the broader economy.

Consider the impact of advances in medicine on hospital stays. A European study found that between 2000 and 2008, medical technology cut hospital stays by an average of 13 percent.

New drug therapies save money by keeping patients healthier — and out of the hospital. A study published by the National Bureau of Economic Research found that Medicare saves more than $2 for each dollar it spends on medicines.

Columbia University Professor Frank Lichtenberg estimates that an additional dollar spent on pharmaceuticals reduces hospital expenditures by $3.65.

Patients have also realized substantial benefits thanks to innovative medicines. Cancer death rates have cascaded downward over the last three decades — from 51 percent over five years in 1977 to 33 percent in 2009.

For this trend, patients can thank innovative cancer therapies, which are responsible for giving Americans 42 million additional years of life over the past 22 years. The total economic impact of keeping all these folks alive and working is roughly $3.5 trillion.

Several technologies in the works promise to bring similar economic and therapeutic benefits.

Take the development of new pill-sized monitors that patients swallow so that doctors can precisely monitor various vital signs in real time.

One such device, made by Proteus Digital Health, uses a patient’s body as a power source. The monitor sends information through a patch worn on a patient’s skin to a cell phone app. It can track such things as blood flow, core temperature, rest patterns, and how a body is responding to a certain medications.

Each “pill” costs just pennies. But by improving doctors’ ability to diagnose and monitor their patients, the devices could deliver a return on investment that’s exponentially larger — in the form of savings to the healthcare system.

Advances in the field of robotics also have the potential to lower health costs — and improve health care — over the long term. The da Vinci robot, for example, empowers surgeons to make tiny incisions and perform intricate procedures with far greater precision than they could on their own.

The result? Surgery is less painful for patients, with fewer scars and a lower risk of infection.

These robots are expensive — the da Vinci robot costs about $2 million. But that cost is offset by shorter hospital stays, fewer complications, and faster recovery times — all of which let patients get back to work or to their regular routine more quickly.

Even in cases where technology does drive health spending up, the benefits in terms of improved well-being may be worth it — especially because the American economy can afford it.

Between 1995 and 2011, real GDP climbed 46 percent. Over that period, the amount that consumers spent on sporting goods shot up 165 percent; on telecommunications, the increase was 111 percent. And the amount spent on Internet access skyrocketed 3,900 percent.

Meanwhile, personal spending on food climbed just 25 percent, according to the Bureau of Economic Analysis.

With these figures in mind, the 57-percent increase in personal spending on health care looks relatively modest.

No one in their right mind would claim that we have a sporting-goods cost crisis. And few Americans can imagine what their lives would be like without the smartphones and nearly universal wireless broadband that increases in telecommunications spending have enabled.

Such developments are viewed as welcome signs of increasing prosperity and technological advancement. Yet increasing levels of spending on health are treated like crises that must be fixed.

The real risk isn’t that we spend too much on health care or medical innovation. It’s that in our drive to reduce health costs, we unwittingly choke off the resources needed to make extend and improve our lives. If that happens, we will all be poorer as a result.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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