It's Complicated: Technology's Role In Healthcare Inflation

The following is reprinted from my recent guest blog posting at Future Healthcare Today.  To see the original posting, please visit:

I love cars and publications about cars. Automobile magazine recently ran a story comparing some desirable car models from the ’70s, ’80s and ’90s to their counterparts today, looking at horsepower, performance, features, and cost. Among the vintage cars spotlighted are a 1988 Porsche 911 Turbo, a 1971 Chevrolet Camaro and 1972 BMW 2002ti.

One of the more interesting aspects of the story is the comparison of original price and the cost of today’s new version of the same model. For example, the 1971 Camaro SS originally ran $3,261, which translates to $18,800 in today’s dollars, after inflation. However, the modern version of the same Camaro sells for $37,850. Why the nearly $20,000 difference?

There are probably several reasons, but one is undoubtedly the advances in technology – both performance – and feature-related – over the last 45 years. Consider the gap between today’s “must-have” performance vehicles and early-’70s, 9 miles-per-gallon gas-guzzlers with Neanderthal-like AM radios and column-mounted stick shifts. When was the last time you had to hand-crank your car windows down? Besides superior fuel efficiency and greatly enhanced performance, today’s cars boast advanced navigational technology, stellar sound systems, self-parking abilities and features barely imagined forty-five years ago.

So if technology accounts for some of the automobiles’ increased costs, is this also true for healthcare?

Part of the answer is certainly “Yes.” A host of new implantable devices and electronically-enhanced diagnostic tools make today’s medicine vastly superior to early Medicare-era care.   And the pace is only accelerating.

So some medical inflation can be chalked up to care being light years ahead of what it was in the past.

Technology can also push costs up through its tendency to add to care activities rather than replace them. The poster child for this is MRI, which was supposed to upstage the CT scan. Since both perform similar, but not identical functions, physicians occasionally order both, obviously adding to overall cost. There are other examples where newer technologies supplement rather than replace earlier approaches.

So that’s the bad news. Technology does contribute to medical inflation.

However, there is also good news. Technology offers significant savings, primarily on three levels.

  • More precise diagnostics and interventions can detect and cure maladies earlier and more effectively, thereby reducing total cost for an episode of care.
  • Many new tablet- and app-based products enhance communication:

Between providers and patients – thereby coordinating care and reducing more costly visits, admissions or readmissions

Among providers – thereby reducing hand-off slippages and improving care.

  • Technology also streamlines business practices, increasing efficiency and reducing administrative costs.

So, yes, it’s complicated. Undoubtedly, some of what we are paying for today is attributable to technology, but this spectacular technology has also allowed us to perform near-miracles on the care front and has also introduced efficiencies on many levels.

Think of it this way. Would most people want to return to yesterday’s technology for either their cars or medical care? Probably not. Granted, the costs are higher, but so are the astounding breakthroughs.