Challenging the Assumption that Costs Always Rise

In this week's New England Journal, David Cutler, an economist and adviser to the White House, lays out a pretty solid argument for why costs might not rise in the future, even without health payment reform. Our prevailing assumption has been that health care costs will continue to rise, at a pace faster than GDP, until health care bankrupts the nation.

Cutler contends this might not be true based on three core ideas:
1) Technology: the rapid rise in health care costs over the past 10 years has been largely fueled by innovations in pharmaceuticals and medical devices. Cutler points out that the pipeline for new technologies is starting to dry up, and increasing imaging costs might be mitigated by imaging benefit managers akin to pharmacy benefit managers. A formulary for how to diagnose knee pain might not be far off. Further, he notes, profitable new technologies tend to draw lots of competitors, so cost growth is likely to be offset by increased substitution effects.
2) Health IT: Obama's plan to increase spending on EMR's and decision support may cut out huge amounts of wasted time in paperwork and administration, not to mention cut costs from duplicated diagnostic testing.
3) Chronic Disease Management: this one's a little trickier for me (see Sree's last post), but Cutler suggests that by improving disease management, we prevent readmissions and therefore reduce acute care costs. Whether these savings are offset by increased life expectancy is yet to be determined.

Overall, I found this article pretty well researched and thought out and I'm reassured that our Doomsday scenarios might not come to pass. That said, I'm kind of glad it looks like health care spend is on the uptick, because it means policymakers are more likely to pass substantial health care reform in the near term.