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Medical technology facts and impact

Dr. Paul Ginsburg of the Center for the Study of Health System Change has stated that technology and the increasing income of the US population are the top drivers of health care costs. The two are interrelated, as health care is a “luxury good” as defined by economists, so the more income one has, the more “luxury” one can afford. While everyone “knows” this, they might not be aware of the “share” of the medical dollar that goes to technology.
Here are a few factoids that may put this in a little clearer perspective.
Total medtech market is about $200 billion annually, and is growing 10% per year.
Medical equipment costs account for 3-6% of total US health care costs.
For radiology, equipment costs account for 10% of procedure costs.
43% of the medtech industry is located in the US, 24% in the EU, and 15% in Japan. So, while we spend a lot for technology, we also benefit from salaries paid to US medtech company workers, taxes paid by the workers and their employers, as well as profits and downstream expenditures from these firms.
The history of the Magnetic Resonance Imaging machine (MRI) in the United States provides an excellent perspective on technology in health care. Originally approved by HHS for very limited use in a handful of settings, MRIs were quickly found to have much broader application than assumed in the original license (American creativity at its best). Physicians, manufacturers, and MRI owners were able to fill the available time slots with patients so quickly that a new, and quite large, market for advanced diagnostic imaging was created within a very short time. This is but one example of the ability of technology and technologists to find lots of new billing opportunities for their new creations.
Interesting sidebar
Qatar, a particularly wealthy Gulf oil exporter with a tiny population, will be spending $150 million per year on research and development. In fact, the Emir (leader) has set aside all income from a substantial portion of their liquid natural gas exports for investments in medical research. Qataris know their petroleum revenues will run out over time, and they’ll need to replace a substantial portion of those revenues. Medtech looks like a potentially promising source.
What does this mean for you?
If you’re a medtech company, prospects are rosy, although watch out for India. For the rest of us, technology is a curse if someone else is using it and you are paying for or attempting to “manage” its use; a blessing if your doctor is using it to diagnose or treat you or someone you love. Technology’s impact on costs is likely to increase over time, as new devices are created to perform new tasks and better perform tasks that used to be done by older (and usually cheaper) technology.

Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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