For many industries, innovation helps to drive down product prices. Over the past few decades, entry-level computers have decreased in price from thousands of dollars to only a few hundred. 1980 saw the debut of IBM's personal computer, which had a Intel 8088 microprocessor and a clock speed of 4.77 MHz. The computer had a price tag starting at $1565—about $4447 in 2013 dollars. Now, desktop computers with GHz processors are available for a few hundred dollars.
There are several examples, however, of medical devices with potential to cut costs. For instance, in the past, heart surgery required the cracking open of a patient's chest, a highly-invasive procedure with long recovery times. With percutaneous heart vavles, it's possible to thread a replacement valve through a patient's arteries. This minimally invasive procedure is less invasive for a patient and boasts faster recovery times.
Despite advances such as with percutaneous heart valves, many economists have predicted a fiscal Armageddon as U.S. healthcare market prices spiral out of control. Despite a slowdown in spending over the past few years, Medicare is likely to go bankrupt in the future.
By and large, the healthcare industry has not followed this downward pricing trend. Instead, new innovations generally increase the cost of care in the United States while outcomes lag behind other first-world nations.
According to some economists like Harvard professor Amitabh Chandra, the dire fiscal state of the U.S. healthcare market is due to the adoption of technologies that are not cost efficient. Aspirin is much more cost-effective than stents, which are used much more widely in the United States. Chandra also points to Antiretroviral drugs for HIV as a cost-effective technology. Despite a roughly $20,000 annual cost, they have proven effective at extending the lives of many patients.
Still, Chandra argues that much medical technology increases cost without markedly improving outcomes.
In other parts of the U.S. economy, technology doesn't lead to these types of price increases. A study concluded that these price increases are due to two basic reasons. First, existing insurance policies (both public and private) will pay for a significant number of treatments, regardless of efficacy. This can lead to cancer patients receiving a chemotherapeutic agent that costs tens of thousands of dollars a month yet only extends life for a few weeks.
On top of this, the "health value per dollar" of different treatments can vary significantly, leading to the use of some treatments that provide minimal value to a patient.
In a study led by Chandra, researchers categorized different treatments into different levels of "health benefits per dollar."
In the low-cost category, researchers placed basic casts, beta blockers for heart disease, antibiotics, aspirin, and other simple technologies that can save or improve lives but at a low price point.
In the medium-cost category, researchers included stents for angioplasty. In angioplasty procedures, a metal stent is used to prop open a patient's blocked blood vessels. While cost-effective for heart attack patients in the first few hours, many patients receive this procedure when its value isn't clear. Since angioplasty procedures receive generous compensation from public and private health insurance policies, there is a strong incentive to perform procedures where their value may be limited.
In the high-cost, minimal-value category, researchers placed devices that provide low value or are not supported by a significant quantity of clinical data demonstrating efficacy. This includes proton-beam accelerators for the treatment of prostate cancer, spinal fusion procedures, and robotic surgery.
In the future, healthcare facilities may look to drive down costs by further scrutinizing the cost/benefit ratio of new technologies,
