Life Science Compliance Update

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November 21, 2012

New Medical Devices – Lowering Healthcare Costs

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The increasing pressure on the healthcare industry to reduce costs, improve quality, and increase efficiency has created several debates about what is driving up healthcare costs.  One such debate has focused on the use of healthcare technology, such as medical devices. 

Some say that healthcare technology can increase costs, due to price and volume effects, both for medical technologies themselves and related services.  On the other hand, research has shown that returns on spending on medical technologies “can far exceed their costs, particularly when longer term benefits are measured in terms of productivity and reduced disability.” 

Consequently, a new AdvaMed report says that contrary to claims that medical devices are driving up health care costs, spending on these technologies rose from 5.3% to just 6.0% from 1989 to 2010, reported MassDevice.com.  “Medical devices are a relatively small and very slowly growing share of national health expenditures,” noted the report, which builds on a study released by AdvaMed released last year, which considered the period between 1989 and 2009.  Moreover, the report showed that medical device spending as a portion of U.S. national health expenditures increased less than 1% over the last 2 decades. 

A similar report released two years ago by Eli Lilly showed that despite suggestions that drugs were causing increased healthcare costs, medicines accounted for only 10% of healthcare expenditures. 

The news comes as AdvaMed and medical device advocates continue working to repeal the 2.3% medical device tax that is set to take effect at the beginning of next year.  The measure, contained in the Affordable Care Act, is expected to raise $30 billion over the next 10 years through a levy on domestic sales of medical devices. 

“The findings underscore the tremendous value medical technology provides to patients and the overall health care system,” AdvaMed payment & healthcare delivery policy executive vice president Anne-Marie Lynch said in prepared remarks.  “Unlike other areas of health care, the prices of medical devices have been growing much more slowly not only as compared to the Medical Consumer Price Index but also as compared to the CPI as a whole.” 

Medical device prices have also grown more slowly than average prices nationwide according to the report, which was conducted by Roland “Guy” King, the former chief actuary for what is now known as the Centers for Medicare & Medicaid Services.  

During the most recent 10-year period, ending in 2010, medical device prices increased at an average rate of 1%, the report concluded.  That compared with 4.1% for the overall Medicare Care Consumer Price Index and 2.4% for the general Consumer Price Index.  Medtech prices gained 0.1% from 2009 to 2010, the period between AdvaMed's last and latest report.  In 2010 medical device spending totaled $156.3 billion or 6.0 percent of total national health expenditures ($2.6 trillion).  

“In view of the conventional wisdom about the role of medical technology in driving up costs, it is surprising that the cost of medical devices has risen little as a share of total national health expenditures,” the researchers wrote.  “It is also striking that, unlike most other areas of medicine, the prices of medical devices have actually been growing more slowly not only than the MC-CPI but also the CPI as a whole.” 

The study included medical device and diagnostics pricing and spending over a 22 year period, excluding laboratory apparatus and furniture, dental equipment and supplies, dental laboratories and diagnostics substances, according to the report.  

The new study may help make some inroads by helping to dispel perceptions that the medical device industry is a prime driver of increased healthcare spending in the U.S. Earlier this year the Bipartisan Policy Center released a report concluding that overuse of expensive and unnecessary medtech innovations is among the primary sources of the skyrocketing cost of healthcare in the U.S. 

“We are proud of the value we deliver as an industry to patients worldwide and look forward to sharing the results of this new study with Members of Congress and other policymakers as they consider changes to the health care delivery and payment system in the United States,” AdvaMed's Lynch said

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Medical devices are always reducing the cost and also reducing the risk of death and worst care; therefore victims are always worried about their healthcare cost and these kinds of medical devices are reduce their risk of high medical cost.

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