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Study: Medical Technology Is Cheap (Relatively)

July 18, 2011
Written by: , Filed in: Practice Management
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Don’t blame medical technology for rising health-care costs.

That’s the message from the Advanced Medical Technology Association (AdvaMed), which as a trade group for medical device makers is not exactly a disinterested source. However, what appears to be a solidly sourced AdvaMed-commissioned study does conclude that from 1989 through 2009, prices for medical devices and diagnostic products—including ever more sophisticated and ever more expensive imaging machines—have increased at an average annual rate of only 1.0 percent.

During the same time period, the average annual rate of increase was 2.8 percent for the general Consumer Price Index (CPI), 4.7 percent for the Medical Care CPI, and 5.0 percent for the Medical Care Services CPI, according to the study.

Looking at it another way, the study found that spending on medical devices totaled 5.3 percent of total health-care expenditures in 1989 ($34.62 billion of $647.21 billion), and 5.9 percent in 2009 ($147.96 billion of $2.49 trillion). The percentage increased from 5.3 percent in 1989 to 6.0 percent in 1992 but has since held steady at about 6.0 percent.

The report concludes:

In view of the conventional wisdom about the role of medical technology in driving up costs, it is surprising that the cost of medical devices during this period has risen little as a share of total national health expenditures and, since 1992, has remained essentially constant.

The study seems to indicate that over the past two decades, we’ve been buying more and more medical technology (defined as everything from stents and surgical tools to massive CT and MRI machines). But because prices for that technology have increased much more slowly than the costs of other elements of the health-care system, the percentage of health-care money spent on technology has remained pretty much the same.

In a call with reporters, Ann-Marie Lynch, AdvaMed’s executive vice president for payment and health care delivery policy, attributed the slow growth in technology prices to competition. DOTmed News quoted her as saying:

We have multiple manufacturers in many parts of our industry developing devices that are highly competitive with each other.

Roland “Guy” King, former chief actuary for Medicare, and Gerald Donahoe, a former longtime economic analyst for the U.S. Department of Commerce, conducted the study. They used data from the Census Bureau and the Bureau of Labor Statistics, among other sources. Statistics for 2009 were the most recent available.

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