How to think about healthcare spending

Here's an interesting article by Victor R. Fuchs, Ph.D, in the New England Journal of Medicine. It looks at future healthcare spending costs; here's what it has to say about advances in medical technology:

Equally important, and equally difficult to predict, are advances in medicine, or in economic terms, changes in medical technology. New drugs, new devices, new imaging techniques, and new surgical procedures have had a huge impact on health care expenditures in the past and probably will in the future as well.

Those who create biomedical innovations usually claim that they reduce costs by detecting or treating diseases more effectively than existing interventions. Most health economists believe that biomedical innovations increase health care expenditures. Both can be correct. Some interventions, such as antihypertensive drugs and cardiovascular surgery, have been found to be cost-effective — that is, the value of their beneficial effects, in terms of lives saved, has been judged to exceed their costs. But because these interventions are used in many more patients than they were in the past, their effect is to increase total expenditures. The scale has tipped particularly far in the case of new interventions for cancer and other diseases that have resulted in only modest improvements in health despite large increases in expenditures....

The role of new medical technology deserves special attention in thinking about future health care spending because biomedical innovations as a whole have been the primary source of both improvements in health and increasing expenditures. On the one hand, it is fiscally irresponsible to continue to accept innovations regardless of cost, even if they pass tests of safety and efficacy — and it is particularly irresponsible when the interventions are provided at public expense. On the other hand, we must avoid an innovation policy that cuts off new interventions prematurely. Some interventions that are not cost-effective at first may prove to be so over time and with greater experience in implementing them.

Fuchs also looks at how a public/private paradigm for determining how much we should spend on healthcare helps to frame the question in a useful way. Full article here.