Megan McArdle on the health care cost slowdown

Technological decline seems more plausible [as a cause]; see this Brookings Institution paper for the extended argument. Basically, health-care innovation is expensive, and for roughly the last decade, we’ve been doing less of it. As old innovations come off patent or are refined into cheaper and better versions, costs fall.

If you think health-care innovation is all useless me-too drugs, you should be pleased that we’re getting less of it. As it happens, I don’t think that’s the case, so while I’m pleased about the budget impact, I’m less pleased at the prospect of fewer new medical technologies. The good and the bad news is that the authors of that Brookings paper don’t necessarily expect the experience of the last decade to be continued in the future — good, because “whee, new treatments!” And bad, because, well, money.

The most worrying possibility is that this reflects a broader slowdown in how fast everything can grow. Certainly, it’s clear that the Great Recession caused a major slowdown in health-care costs everywhere; if you graph the data from the Organization for Economic Cooperation and Development, there’s a sharp, across-the-board inflection point in 2009.

There is more here.


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