An Academy Health Blog post last week set both Lamberts and my something is wrong with this picture alarm bells ringing. The article, How coverage and technology interact, cites mainstream, widely-cited studies on what allegedly drives health care cost increases. Here are the opening paragraphs:

As I posted previously, many studies have pointed to technology as a principal driver of health care spending growth. Those studies also credit third party payment (i.e., insurance) and income for some of the blame too. More interesting, coverage, income, and technology interact; their intersection is explored in a few papers summarized below.

The 2009 paper in Health Affairs by Shelia Smith, Joseph Newhouse, and Mark Freeland is one of the sources for the chart above. (See this post for additional detail.) In it, the authors note that interrelationships among technology, income, and insurance are strong, which makes it difficult to assign specific quantitative magnitudes to each factor.

Burton Weisbrods fascinating 1991 paper, The Health Care Quadrilemma, may have been the first to deeply contemplate the insurance-technology nexus. In it, he explained how the expansion of health insurance has paid for the development of cost-increasing technologies, and how the new technologies have expanded demand for insurance. Weisbrod recognized that the key linkage is the research and development (R&D) process

This sort of thing drives me to despair. Go look at that chart. How can you begin to pretend that those categories are mutually exclusive? They arent even remotely, as even the snippet of the post Ive provided demonstrates, and youll see even more proof if you read it in its entirety. So what is the point of engaging in the pretense of quantification when the explanatory variables are not at all discrete drivers?

And what should really get you skeptical is the vague term technology. What does that mean? Is a new drug technology? Even if so, what about all the new drugs (via FDA classification as new drug applications) that are merely exercises in intellectual property rent seeking? The overwhelming majority of NDAs (Ive seen estimates of 88%) are not new drugs at all but merely minor reformulations, like an extended release version, that allow patent life to be extended and for price increases (the new version is pushed hard to doctors and always priced higher than the existing version).

But we dont even have to get that granular. It turns out that technology is the error bar, all of the not explained otherwise factors. No, I am not making that up. From the 2009 Health Affairs paper cited above:

The conclusion that technological change explains much of the growth rests on a macroeconomic approach that seeks to estimate the contribution of known factors to health spending growth and assumes that most of the unexplained residual growth is attributable to technology.

Go look back and look at the chart again. How much faith can you put in an analysis where far and away the biggest single factor, in most cases accounting for roughly 50% of the total, is what you cant otherwise explain? And worse, the researchers call it technology which makes it sound virtuous!

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Health Care Cost Studies Pointedly Ignore Bad Incentives, Market Failure as Drivers