Effects of Technology on Health Care Costs

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Introduction Healthcare advances have been occuring at a rapid rate over the past two decades. Advances in technology have impacted all aspects of healthcare. These advances are not limited to drugs and devices but may also include new surgical procedures, new applications of existing technology, information technology, or communications advances (Clancy, 2003). However, spiraling costs, increased demand, and the need for better coordination of information have placed a heavy burden on both consumers and providers (Agency for Healthcare Research and Quality, 2006). The rising health care costs has been attributed to different issues, for instance high and rising costs are created by forces external to the health system, the weakness of a competitive free market within the health system, rapid diffusion of new technologies, excessive costs of administering the health system, the absence of strong cost-containment measures and by undue market power of health care providers. Over along period of time, new medical technology has always been on the forefront driver in increasing the health care costs and other charges like insurance premiums. Moreover applications of new technologies, for instance, magnetic resonance in imaging may be even more important to rising in cost as compared to technologies currently being used in medical care for the first time. Some of the new technologies like many vaccines, for instance there effect tend to lower spending, but researchers have shown that, to try and balance the dynamic technology in medicine fields results in increase in spending and accounts for more percentage of the increase in health care spending in excess of general inflation(Kaiser, 2004). We have very many options of reducing the trends in health care costs, this can be done by increasing the efficiency of health care delivery, increasing the financial incentives for patients to limit their use of medical services, increase the administrative controls on the use of these services or by limiting the resources available to the health care system. Health care systems throughout the world have shown to pursue variations on all four options, and the success of their efforts depends in part on how vigorously cost-containment tools are applied. But success does not come easily. For one thing, all health care spending represents someone else’s income, and those who are facing a loss of income will work towards blocking the efforts to contain costs. Furthermore these options, with the possible exception of the first, will always require some people to get less medical care than they would like. For the most part, our leaders have been unwilling to acknowledge the inherent trade-offs between health care costs and people’s access to care(Strunk, 2004). Government may be able to contribute to the efficiency of the health care system by supporting the development and installation of information technology to improve the coordination of patient care; Current efforts to improve system efficiency give priority to improving the quality of care and have an uncertain effect on costs. For example, efforts of increasing the rate of conformity to practice guidelines may increase beside decreasing the use of services. Many health policy experts have offered vague assurances that increased quality would result in a reduction of costs, seemingly in an effort to avoid acknowledging that there may be a trade-off. compensation of injured patients. The present environment for the healthcare organizations contain many forces demanding unprecedented levels of change. These forces include changing demographics, increased customer outlook, increased competition, and strengthen governmental pressure. Meeting these dynamic challenges requires healthcare organizations that will go through fundamental changes and try to continuously inquire about the new behavior to produce future value (Baldin, 1995) . Health care is an information-intensive process. Pressures for management in information technology are increasing as healthcare organizations feature to lower costs, improve quality, and increase access to care. Health care organizations have developed better and more complex. Information technology must keep up with the dual effects of organizational complication and continuous progress in medical technology. The key question from the policymakers around the world has been why spending on health care consistently rises more rapidly as compared to spending on other goods and services. In response health care experts pointed to the development and diffusion of medical technology as primary factors in explaining the persistent difference between health spending and overall economic growth, with some basing their argument on new medical technology which is thought to account for about one-half or more of real long-term spending growth (Strunk, 2004). Traditional approaches versus New Technologies Besides advancement in technology there is no doubt that traditional "blockbuster"-kind of drugs will continue to bring development which may bring important public health benefits to many millions of patients around the world, for instance breakthroughs in biomedical sciences and discoveries in other new fields of molecular biology also hold great promise for truly individualized drug therapy in which diagnostic tests and novel drug delivery mechanisms guide the use of medications, turning heterogeneous diseases like cancer and heart disease into different kinds of pathologies that appropriately require distinct therapeutic approaches(Kaiser, 2004). On the other hand, new technologies are breaking down the traditional barriers between drugs, tissues, and devices, including products in development that which have diversified combinations. By translating the new biomedical sciences into these new kinds of treatments for patients requires major new investments, thus fully supporting research activities around the world and this seems plausible that such investments may take many years to reach fruition. It should not be surprising that we haven't yet seen the huge increase in biomedical investment of the past decade, and especially the last few years, turn into more and more valuable medical products for patients. On the research and development side, it's possible that the costs and uncertainty of developing new treatments could keep rising. It's easy to see how this could happen: there are not many more obvious drug targets left to exploit, and for example, developing genomics- and proteomics-based therapies remains very costly. So far, genomics has mainly added steps at the front end of the development process, through micro array testing of gene responses, and has not reduced the costs of clinical research significantly. On the policy side, there is intense pressure to make health care more affordable, and so the focus tends to be on reducing shorter term medical costs. Impact of technology on health care costs Health care expenditures continue to swell very rapidly around the world. For instance in U.S. Health care costs has grown at an average rate of 9.9% annually or 2.4% faster that the economy as measured by the nominal Gross Domestic Product (GDP). Its estimated that health care expenditures per capita rose from $ 360 in 1972 to $6,700 in 2006 and has been projected to increase to $12.400 in 2015. While a particular new technology may either impact a rise or a fall in health care spending, researchers generally agree that, taken together, advances in medical technology have contributed to rising overall U.S. health care spending. Rettig has identified some mechanisms of action of new medical technology which has affected the costs health care. The expansion of the indications for a treatment over a given duration of time, this increases the patient population to which the treatment may be applied. The on-going, rise in improvements in existing medical capabilities, which may improve quality (Mark 2003). The clinical progress, through major advances or by the cumulative effect of incremental improvements, that extends the scope of medicine to conditions once regarded as beyond its boundaries, such as mental illness and substance abuse. Development of new treatments which previously was untreatable conditions, including long-term maintenance therapy for treatment of such diseases as diabetes, end-stage renal disease, and AIDS; Major advances in clinical ability to treat previously untreatable acute conditions, such as coronary artery bypass graft; development of new procedures for discovering and treating secondary diseases within a disease, such as erythropoietin to treat anemia in dialysis patients. Note Whether a given new technology either increases or reduces the total health expenditures, this will depend on several issues. First is its impact on the cost of treating an individual patient. Does the new technology supplement existing treatment, or is it a full or partial substitute for current approaches? Do these changes result in higher or lower health spending for each patient treated In looking at the effect on cost per patient, consideration needs to be given to whether the direct costs of the new technology include any effect on the use or cost of other health care services such as hospital days or physician office visits. A second factor is the level of use that a new technology achieves for instance, how many times is the new technology used?. Does the new technology extend treatment to a broader population? For examples would be innovations that address previously untreatable illness, diagnose new populations for existing treatments, or extend existing treatments to new conditions. New technologies can also reduce utilization, for example, new screening or diagnosis capacity that allows more targeted treatment. There also are temporal aspects to evaluating the impact of new technologies on costs. Some innovations, such as a new vaccine, may cost more immediately but may lead to savings down the road if the vaccine results in fewer people seeking more expensive treatment. New technologies also can extend life expectancy, which affects both the type and amount of health care that people use in their lifetime. The evaluating of the effect of new innovation could appear to be complicated. For instance, when we try to focus on a single technology or disease may show cost savings based on the costs and benefits of the new technology, this could be so, if it replaces a more expensive technology and provides health improvements, while an analysis of health care system-wide costs may show cost increases if the new technology results in greater utilization than the old. A specific example is anesthesia, where substantial innovations have occurred in recent years. Better anesthetic agents and practices have reduced the burden of surgery on patients, producing faster patient recoveries, shorter hospital stays, and fewer medical errors. These changes reduced the cost per patient compared to surgery in the absence of these changes. At the same time, these innovations also make it possible to perform surgeries on patients who previously would have been considered too frail to undergo the surgery; this adds to the amount of health care that is delivered system-wide, thus perhaps increasing total health care spending (Mark 2003). From the research undertaken,it is not possible to directly measure the impact of new medical technology on total health care spending; innovation in the health care sector occurs continuously, and the impacts of different changes interrelate. The size of the health sector and its diversity for instance the thousands of procedures, products, and interventions also render direct measurement impractical. Economists estimations Economists have used indirect approaches to try to estimate the impact of new technology on the cost of health care. Recently it has been estimated that the impact of medical technology on health care spending by first estimating the impact of factors that can reasonably be accounted for, examples includes: Spread of insurance, Increasing per capita income, Aging of the population, Supplier-induced demand, Low medical sector productivity gains.s The factors listed above account for well under half of the growth in real medical spending, and that the bulk of the unexplained residual increase should be attributed to technological change,that is “the enhanced capabilities of medicine.'' In the recent past, economists have tried to quantify the value of biomedical innovation to society. Some have estimated that the value of the longer and better lives that have resulted from translating new biomedical knowledge into steps to prevent and slow diseases is worth literally many trillions of dollars in better health. For example, the value of new biomedical innovation to the U.S. equals the value of innovation in all other sectors of the American economy combined. Even with the benefits of new medical technology, the fact remains that technological innovation is a major source of increase in real per-capita medical spending in the U.S. Innovations in medicine can reduce spending on medical care. For example, treatments ranging from effective care for depression to laser eye surgery are much less expensive than in past years(Kaiser, 2004). But many new technologies result in increased costs, and in some instances the net effect of overall technological change has been to raise health care expenditures. First, when a treatment becomes less expensive and safer that is less complications. For instance, patients with heart disease, cardiovascular disease, cancer, arthritis, AIDS, and countless other conditions are living longer and better lives because of medical innovations that transformed fatal illnesses or illnesses that could only be treated with comfort measures into manageable conditions. The increased spending on health care does not necessarily reflect negatively on technological change. While many studies attribute a large share of the age- and price-adjusted growth in per capita medical spending in recent decades to technological innovation, a key issue is whether the benefits of innovation are rising faster or slower than the costs. Currently, there are many people in around the world, who are uninsured, and many people see universal health care as a solution. The problem is that the concept is not as simple as it sounds. There are many flaws and sacrifices that come along with the universal health system, and that is what most people are unaware about. Universal health care is defective because of the government's inability to pay excess costs, the poorer quality and tardiness of health care services, and the doctors' limited access to cutting edge technology and modern medicine due to government cost control. Since most of the government have to pay for everyone's health care, expenses can be overwhelming, and the government must cut down funding on other programs and raise taxes. With these high expenditures, the medical procedures and access to modern technology and medicine must be strictly controlled to only adequate health services. Since universal health care covers everyone's health services in the nation, costs are too astronomical(Strunk, 2004). Factors which Affects the Growth of New Medical Technology Many factors influence innovation in medical care. The consumer demand for better health is a prime factor. Research shows that the use of medical care rises with income, this means that as people and the nation become wealthier, they provide a fertile market for new medical innovations. Consumers want medical care that will help them achieve and maintain their healthier standards. Potential policy solutions to health care services Policy makers are supposed to take steps today towards improving the development and use of medical technologies, and find creative policy solutions that both support innovation and make healthcare costs more affordable, particularly for those with limited means and great needs. There are so many ways of doing this, although, we need to increase value in the process of developing and using new medical technologies. Governments should only implement policies that are friendly and involves low costs. Medical agencies have taken an initiative on improving medical innovation by taking specific steps to help foster more efficient innovation, especially in emerging areas or those of great medical need. The initiative has several elements as shown below; Need for Performance Measures The key part of this effort is developing performance measures that the Agency's experts believe are related to the goal of approving safe and effective treatments as efficiently as possible. This will always tend to lower the health care costs. Despite all the innovation that has already occurred, these are therapeutic areas that remain underserved by effective treatments and that have promising technologies under development today. Developing New Guidance for New Areas The Agencies are also developing guidance in new areas of technology development, including pharmacogenomics, novel drug delivery systems, and cell and gene therapy. In each of these cases, the Agencies expects to learn something from outside experts in the open process of developing them. For example, FDA is setting up a "research exemption" program for product developers as well as academic experts to share data on pharmacogenomic results, such as microarray studies, that may be useful for predicting clinical benefits and risks and thus reducing the costs of demonstrating safety and effectiveness. This kind of information can also be used to increase the value of a new medicine by allowing doctors to target drugs to patients most likely to derive a clinical benefit or least likely to suffer a rare side effect (Grumbush 2006). Rapid Access to Generic Drugs Supporting the development of safe and effective new treatments is one of the most important ways that FDA can promote the public health. Encouraging rapid and fair access to more affordable generic medications is one of FDA's major priorities. Revised Good Manufacturing Practices Another application of the principle of efficient risk management to reduce medical costs and improved outcomes is in improving the way that medical products are manufactured. Through continuous quality improvement, those methods achieved enormous improvements in production cost and quality, and they have since been widely adopted in manufacturing industries. But continuous quality improvement in manufacturing hasn't been the subject of as much attention in the pharmaceutical industry, even though many experts on manufacturing processes believe that large savings in production costs could be realized while maintaining very high standards for purity and accuracy.

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