For 40 years, health costs have grown faster than the general economy in the U.S.

Technological advances in theory can reduce costs. However, a new study done for the Senate Budget Committee finds that, surprise surprise, the “increased capabilities of medicine” tend to raise spending.

Technological Change and the Growth of Health Care Spending, the Congressional Budget Office (CBO)’s report issued last week, details the history of rising technology spending in health and offers a sobering warning about how health care costs are overtaking the American economy.

In the report, “technological advances” cover the broad range of health technologies — “any changes in clinical practice that enhance the ability of providers to diagnose, treat, or prevent health problems.” These include new drugs, devices, or services; new clinical applications of existing technologies; and newly developed techniques or additions to knowledge.

Of course, we love when technology prolongs our lives, and the quality with which we live them. The CBO isn’t arguing against that fact. Rather, the problem is that many new technologies don’t bring with them a positive cost-benefit compared to existing therapies. The CBO finds that, “Newer, more expensive diagnostic or therapeutic services are sometimes used in cases in which older, cheaper alternatives could offer comparable outcomes for patients.”

Furthermore, it’s been my observation for many years that when new technologies enter health care practice (once they’re reimbursed by Medicare and commercial payers), they’re additive and don’t immediately eliminate or substitute ‘old’ technologies from practice. Old med tech’s never die; they hardly ever fade away!

Thus, CBO argues for the implementation of evidence-based care, and the emerging concept of value-based medicine that Medicare and commercial payers are piloting.

If not? CBO warns: “The nation’s long-term fiscal balance will be determined primarily by future growth in health care costs.”

Health Populi’s Hot Points: The elasticity of demand among insured Americans’ taste for new health technology is pretty inelastic — that is, if you’re covered, you’re game to demand the new-new. However, let’s say that a payer (whether commercial or public, like Medicare) reimburses the provider based on the most effective treatment for the case. That decision would be based on comparative effectiveness studies between the new-new and the existing treatment. If the consumer-patient opts for the new-new, unproven technology, then the consumer would have to pay some proportion of the cost determined by the payer. This could be a real incentive to slow the adoption of unproven medical technologies, thus stemming the rate of cost increases in the technology component of the health care bill. It’s certainly one strategy worth implementing as health approaches 20% of the GDP by 2016.