Medical Technology: Benefits Far Outweigh Costs

As America ages and sedentary lifestyles and unhealthy diets become more common, experts agree the nation is suffering a sharp rise in the prevalence of chronic disease.

So as the 21st century unfolds, some in the healthcare industry argue that technology—in the form of advanced diagnostic and therapeutic devices—can meet the need for prevention and more effective management of illness. That belief, however, has been questioned by some researchers, who wonder whether the overall economic benefit of technical advances outweighs the costs. To help answer that question, researchers at the Milken Institute undertook a comprehensive examination of medical technology’s impact on the economic burden of disease—a positive benefit of more than $23 billion annually for the United States.

The study, “Healthy Savings: Medical Technology and the Economic Burden of Disease,” also projects how future innovation in this sector would affect the health-care system and the larger economy.

The study documents the full costs and broader economic benefits of health-care investments by examining innovations pertaining to four common causes of disability and death: heart disease, diabetes, colorectal cancer, and musculoskeletal disease. The report considers therapeutics and diagnostic devices that are widely used and have substantially affected the lives of patients as well as the overall U.S. economy.

Among the 10 devices or device-based procedures studied are angioplasty, insulin infusion pumps, colonoscopies, and joint replacement surgery.

The data demonstrate that the use of medical technology brings considerable economic benefits. Some are seen in both aggregate savings in treatment expenditures and prevention as well as the reduction of “indirect impact” through larger contributions to the economy—for instance, the additional benefits to worker productivity that come with a healthier employee. “The concept of indirect impact is a key part of our study,” says Anusuya Chatterjee, Senior Economist at the Milken Institute and an author of the report. “For example, joint replacement surgery can relieve pain, dramatically reduce sick days and raise productivity. This technology often improves the chances of curing a patient’s condition, can extend his or her survival, and can boost the economy through expanded workforce participation and stronger on-job performance.”

As part of the study, the researchers constructed three alternative trajectories through 2035 for continued technological innovation for each of the four diseases. In the scenario that assumes medical technology innovations follow an accelerated path, the research points to a cumulative $1.4 trillion gain for the nation’s economy.

The report breaks down the economic benefits of medtech by various factors, including per-person annual savings, gross domestic product, tax revenue and net annual benefit. For example:

• Diabetes:Use of insulin pumps generated annual savings of $5,886 per person and $34.9 million in increased tax revenue;
• Musculoskeletal disease: Persons who underwent MRI and joint replacement surgery generated $24,518 in savings individually and $3.8 billion in increased tax revenue.

“Healthy Savings” does not examine specific policies that may affect incentives to invest in technology development, but it does make clear that such incentives have significant consequences for the economic costs and benefits generated by the American healthcare system.

“The medical technologies studied generated economic returns that were substantially great than their costs,” says Ross DeVol, chief research officer at the Milken Institute and one of the study authors. “Policies that support enhanced investment in development, improvement, and diffusion of medical technologies not only bring immense benefit to individual patients, but a brighter economic future for the country as a whole.”

Advanced Medical Technology Association President Stephen J. Ubl said the report shows the need for public polices that provide incentives for innovation.

“The numbers speak for themselves,” he said. “To those who claim we can’t afford the innovations our industry produces, my response is—for the sake of patients and the economy both now and in the future—we can’t afford not to have them. The report also demonstrates that, with the proper incentives, the U.S. can continue to reap economic benefits from medical technology for decades to come. Over the next 25 years, policies favoring medical innovation are projected to result in U.S. economic gains of $1.4 trillion from future generations of technologies for the four diseases studied. On the other hand, the report warns that policies discouraging innovation could cost the economy $3.4 trillion over the same period. If we want a future that realizes the promise of medical technology, we need to work now to ensure that appropriate public policies are in place that provide incentives to promote innovation.”