Are medical devices to blame for rising health care costs?

by Brendon Nafziger, DOTmed News Associate Editor | October 25, 2012
Spending on medical devices has held steady for the past two decades as a proportion of U.S. health care expenditures, and the price of devices has risen slower than consumer inflation, according to a new industry-funded study.

The Advanced Medical Technology Association, or AdvaMed, a trade lobby of device manufacturers that financed the research, said the report shows that the medical device industry is highly competitive and not a "major driver" of the nation's health care costs.

"Medical care device spending has not increased as a percent of national health expenditures, and is not one of the drivers for increases," in national expenditures, Guy King, former chief actuary of Medicare and the study's co-author, told reporters Wednesday in a press conference unveiling the findings.

Total expenditures on medical devices in 2010, the most recent year included in the study, were $156.3 billion, or about 6 percent of the $2.6 trillion the country spends on health care.

The amount spent on devices fluctuated slightly over the years but only grew less than 1 percent since 1989, when devices accounted for about 5.3 percent of the country's health costs, the study said. In essence, King said medical devices reached 6 percent of the NHE in 1992 and have basically stayed there ever since.

Price control

According to King and his co-author, Gerald Donahoe, an economist who once worked with the Department of Commerce, medical device prices kept below consumer inflation levels, inching up an average of 1 percent per year in the 22-year period covered by the study. Meanwhile, the consumer price index, a common measure of inflation of consumer goods, averaged 2.7 percent, the CPI for medical care averaged 4.7 percent and the CPI for medical care services averaged 5 percent per year, King said.

Although the study found device prices growing at a steady pace, it did not take into account other costs associated with medical equipment, such as utilization of imaging devices or other products, which have been blamed for rising medical costs.

The authors said those outside costs were beyond the scope of their research.

"We wanted to do a relatively straightforward study," King explained.

"As you know, there are theories that medical devices, at least some medical devices, have the tendency to increase spending, and then there are theories that some medical devices have a tendency to make the medical care system more efficient and therefore decrease expenditures," he added.

Tax and spend

Although AdvaMed has released versions of this report in previous years, the 2012 edition comes at a critical time for the medical device industry. Device companies are bracing for a 2.3 percent excise tax on device sales. The tax, part of the Affordable Care Act, is scheduled to take effect in January if aggressive lobbying efforts to kill it fail.

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