NCPA - National Center for Policy Analysis

DOES BETTER HEALTH CARE MEAN HIGHER COSTS?

January 29, 2010

Advanced medical technologies are not contributing to rising American health care expenditures because the money they save makes up for the money spent on them, concludes Frank Lichtenberg, an economist with Columbia University. 

According to Lichtenberg, life expectancy increased faster in states that more rapidly adopted advanced diagnostic imaging techniques, were quicker to use new drugs, and attracted an increasing proportion of doctors from top medical schools: 

  • Between 1991 and 2004, the average life expectancy at birth in the United States increased by two years and four months; during that time, Lichtenberg finds, the use of advanced imaging procedures nationwide almost doubled, rising from about 10 percent to nearly 20 percent.
  • Lichtenberg calculates that the deployment of such diagnostic techniques as CAT scans and MRIs was responsible for boosting average U.S. life expectancy by about eight months during this period.
  • He estimates that the adoption of newer drugs increased average life expectancy by another 18 months; by contrast, the fraction of physicians being trained at top medical schools has declined, which Lichtenberg reckons has reduced overall life expectancy by three to five months. 

Interestingly, Lichtenberg found that "growth in life expectancy was uncorrelated across states with health insurance coverage and education, and inversely correlated with per capita income growth."  The last finding is a bit puzzling, says Reason magazine.  Lichtenberg calculates that the average 20 percent increase in real per capita income lowered average life expectancy by four to five months, and he finds that states with high income growth had smaller longevity increases.  

In any case, it looks like high-tech medicine and better physician training boost life expectancy.  But what about costs?  Are critics right to blame technology for the high price for modern medicine? 

Lichtenberg looked at per capita medical spending by state: 

  • The top six states used advanced imaging diagnostics roughly 30 percent more often than the bottom six, for instance, making them ripe for comparison.
  • He found that the states with larger increases in high-tech diagnostic procedures, newer drugs, and higher quality physicians did not have larger increases in per capita medical spending. 

Source: Ronald Bailey, "Does Better Health Care Mean Higher Costs?" Reason, February 2010. 

For text:

http://www.thefreelibrary.com/Does+better+health+care+mean+higher+costs%3F+Medical+innovation+boosts...-a0216331980  

 

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