Thursday, February 21, 2013

Should Technology make Health Care Cheaper?

There is a big cover story for Time this week on health care prices. I only got through the first page before I stumbled onto this question:
And what is so different about the medical ecosystem that causes technology advances to drive bills up instead of down?
People often talk about technology reducing costs but . . . I just don't see it in any industry except computers.

CPUs, hard drives, memory chips, and the like have gotten both better and cheaper over time, but everything else gets better but more expensive. (All of this discussion is adjusting for inflation.)

Cars get better gas milage than they did in the 1970s and you are a hell of a lot less likely to die driving thanks to better construction, airbags, seatbelts and the like. And they break down less often to boot. But car prices have increased dramatically over time due to the addition of those features and other technological innovations like cameras to guide backing up, power windows, power locks, etc.

Movie studios have increasingly relied on computer technology to help bring stories to life. Digital imagery has allowed movie studios to blow audiences away since Jurassic Park came out in 1993. But Jurassic Park cost $63 million to make, more than double the inflation-adjusted cost of Star Wars at $25 million. Digital imagery helps movies come to life, but the cost of developing the software, hiring animators, and buying the technology to render scenes has raised the cost of making movies (and ticket prices) the same way safety features have raised the price of cars.

There has been enormous advances in TelCom over the past few decades. Butter's Law says that network capacity doubles roughly every year and wireless networks have become increasingly reliable. In the 1990s no one had a cellphone and you connected to the Internet using dial-up, but now you can get a high-speed Internet connection over your cellphone. Of course, the price of FiOS and a data plan from Verizon is at least 5x what you paid for Compuserve in 1999, even adjusting for inflation.

Health care similarly uses diagnostics technologies  to detect diseases earlier, new pills to cute formerly untreatable disease such as HIV, and new surgical procedures to save people's lives. But the cost of developing, building, and testing these technologies is enormous so they have, just like digital imagery for movies, safety features in cars, and fast, reliable wireless for the Internet, raised the cost of the product.

So everywhere you look except for semiconductors new technology has made things better and more expensive, not cheaper. Yet whenever I hear people talk about technology and health care they act like the increasing speed and decline prices for computers is the rule and health care is the exception.

1 comment:

  1. Thanks Mr. White

    I always find myself learning more when I read your blog