Cost of medical technology only small part of national health costs and rising slowly

8 June 2009

A US study of the costs of medical technology has reported that it is a small and slow growing part of national health expenditure (NHE).

The report by the Advanced Medical Technology Association (AdvaMed) found that in 2006, medical device spending in the US totalled US$131.6 billion or 6.2% of total national health expenditures (US$2,112.7 billion). During the 18-year period covered by the study (1989-2006), medical device spending rose only slightly as a percentage of national health expenditure — growing from 5.4% in 1989 to 6.2% in 2006 — a 0.8 pecentage point increase over the 18-year period.

“It is striking that the direct cost of medical devices and diagnostics, which are so central to medical practice and which have been the source of so much medical innovation, account for a relatively low and slowly growing share of overall national health expenditures,” said Stephen J. Ubl, President and CEO of AdvaMed.

The report finds that medical device price changes have been consistently low during the 18 years examined. Medical device prices have increased at an average annual rate of 1.1%, compared to the Consumer Price Index increase of 2.9%, the Medical Consumer Price Index increase of 4.9%, and the Medical Services Consumer Price Index Increase of 5.2%.

While medical device spending has grown slightly faster than national health expenditures overall, prices for medical devices have actually grown far more slowly than the Medical Consumer Price Index or even the overall Consumer Price Index.

“This relatively slow rate of price increase is consistent with the findings from our earlier report and is due, in large part, to the highly competitive nature of the medical technology industry,” said King.

John Wilkinson, Chief Executive of Eucomed, the European medical technology association, commented on the findings: “Without the medical technology industry the cost of delivering healthcare today would be substantially higher than it currently is.

"The challenge for the European sector is to prove it and demonstrate the error in conventional thinking. That’s why Eucomed founded the European Health Technology Institute for Socio-Economic Research (ETHI) to research how these medical technology innovations impact the economy and welfare of European countries.

"Our sector is committed to support strained healthcare systems where the real drivers of cost inflation are of a demographic nature and the consequence of increased expectations by citizens for higher quality of life.”

As the report concludes, “During much of the eighteen year period, 1989–2006, a significant driver of changed medical practice has been the development of new medical devices — from stents to implantable defibrillators to artificial hips and knees to new imaging modalities to new diagnostic tests to new surgical tools.

"In view of the conventional wisdom about the role of medical technology in driving up costs, it is surprising that the cost of medical devices has risen little as a share of total national health expenditures. It is also striking that, unlike most other areas of medicine, the prices of medical devices have actually been growing more slowly not only than the MCPI but than the CPI as a whole.”

Download the report as a PDF file from AdvaMed’s website.

Bookmark this page

To top