How technology affected medicines?

Answer 1

Health expenditures continue to grow very rapidly in the U.S. Since 1970, health care spending has grown at an average annual rate of 9.8%, or about 2.5 percentage points faster than the economy as measured by the nominal gross domestic product (GDP). Annual spending on health care increased from $75 billion in 1970 to $2.0 trillion in 2005, and is estimated to reach $4 trillion in 2015. As a share of the economy, health care has more than doubled over the past 35 years, rising from 7.2% of GDP in 1970 to 16.0% of GDP in 2005, and is projected to be 20% of GDP in 2015. Health care spending per capita increased from $356 in 1970 to $6,697 in 2005, and is projected to rise to $12,320 in 2015.1

The particularly rapid increases in health insurance premiums over the last few years have focused the health policy community on the issues of cost containment and health insurance affordability. A key question from policymakers is why spending on health care consistently rises more rapidly than spending on other goods and services. Health care experts point 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 arguing that new medical technology may account for about one-half or more of real long-term spending growth. This paper briefly describes what health policy analysts mean by medical technology and the mechanisms by which it affects the growth in health care costs.