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Few Innovations Lower Cost

By November 12, 2009Commentary

Annals of Internal Medicine carries a study analyzing the cost-effectiveness of over 2000 medical innovations to identify whether there were some which cost significantly less than usual care, but also had acceptably lower outcomes or quality.  (Annals Abstract) The theory was that people would accept a lower quality if the savings are large enough and that if the system could find a number of these “decrementally cost-effective” innovations, adoption of them could contribute to cost reduction goals.  Interestingly, consumers apparently would demand about twice the amount of savings to give up some quality they currently have than they would pay to get additional quality above what they currently have.

Out of 2128 cost-effectiveness comparisons, only 9 fell into this category, demonstrating that either it is very difficult to create these innovations or that the system currently provides few incentives for them to be developed.  The overwhelming majority of comparisons, 1533, were both quality-improving and cost-increasing.  There were 350 that improved quality and reduced costs.

The results are consistent with other studies indicating that innovation is a major driver of increasing health costs.  But the study also suggests that rather than worrying about encouraging decrementally cost-effective innovations, we should focus on incenting those that improve quality and reduce costs, which are far more numerous, suggesting that they are easier to find.

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