Why Medical Technology is Driving Health Care Costs

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From the introduction to Taming the Beloved Beast by Daniel Callahan

In a rare instance of consensus, health care economists attribute about 50% of the annual increase of health costs to new technologies or to the intensified use of old ones. That annual increase has fluctuated between 7% and 12% per year for many years now, and there is every expectation that it will persist at around 6-7% for the indefinite future. Medicare's cost increases are projected to be 7.4% a year between 2006 and 2017.
The frightening thought that the innovation that has saved so many lives and reduced so much suffering could itself be playing a leading role in our health care discomfort is hard to accept, difficult to talk about openly, and politically controversial. It connotes rationing of medical treatments, limits, and a direct threat to the cherished value of relentless progress against illness and death.

With health care reform in general, there are many novel ideas in the air, often accompanied by a strategy to implement them. But specifically for the manageI ment of technology, most general proposals do not encompass an implementation strategy...nothing less than a cultural revolution in our thinking about progress, technology, death and aging will suffice to do the job.

I strongly endorse the idea that our health care costs are driven by our technology and our values. My guess is that I disagree with Callahan on how to deal with these issues. But at least he and I could have a decent conversation about them. In my own book, I used the term "premium medicine" to describe the intensive use of technology.

Tyler Cowen provided the pointer to the book, and he has another key excerpt plus his own commentary.

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Arnold Kling

Arnold Kling earned his Ph.D in economics at MIT. He was an economist on the staff of the Federal Reserve Board. From 1986-1994 he worked at Freddie Mac. He started Homefair.com in 1994 and sold it in 1999. His fourth book, From Poverty to Prosperity, co-authored with Nick Schulz, is due out in April of 2009. He blogs regularly at Econlog.
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