The use of technological advances in developing new medicines and treatments has caused increased healthcare spending and should be curbed to reduce costs, according to a report from the Congressional Budget Office (CBO) released last week. The paper also discusses the implications of continued technological change for future growth of healthcare spending.
In the report, "Technological Change and the Growth of Health Care Spending," CBO defined technological advances broadly to include any changes in clinical practice that enhance the ability of providers to diagnose, treat or prevent health problems. The report found that about half of the increase in healthcare spending since 1965 was on technological advancements that expanded medical capabilities.
“In the absence of an unprecedented change in the long-term trend, healthcare spending will continue to grow as a share of GDP over the coming decades,” according to the report. CBO projects that the share of GDP devoted to healthcare will rise to 31 percent by 2035, 41 percent by 2060, and 49 percent by 2082. Federal spending on Medicare and Medicaid is also projected to grow as a share of total spending on healthcare, according to the report.
"Over the past four decades, Medicare's and Medicaid's costs per beneficiary have increased about 2.5 percentage points faster per year than has per capita gross domestic product (GDP)," wrote Director Peter Orszag, in his recent report to CBO. According to CBO’s current-law projections, those figures will grow to 9 percent of GDP by 2035 and to 19 percent of GDP by 2082.
To reduce spending, the report recommended slowing the "diffusion" of expensive treatments or procedures by increasing the selectivity of what medical services are available to patients. CBO acknowledged that this would lead to fewer available medical services, but it also suggested that there will not be a significant loss in clinical effectiveness.
The report noted that the benefit of new services has not yet been "rigorously demonstrated."
Orszag presented the report findings on Monday before the National Health Policy Conference in Washington, D.C. Later that day, President George W. Bush called for reductions to the Centers for Medicare & Medicaid Services' budget by $16 billion in 2009, $196 billion over the next five years and $619 billion over 10 years in his 2009 $3.1 trillion fiscal 2009 budget proposal.
Bush said that his proposals would lower Medicare’s growth rate from 7 percent to 5 percent annually and eliminate one-third of the program’s 75-year unfunded liability of $34 trillion toward his goal of reducing spending and balancing the federal budget by 2012.