Technology and the costs of health care

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Tyler Cowen links to this piece by Daniel Callahan about how the technology innovations are driving up the price of health care. The point Callahan is attempting to make is that we need to focus more on basic care, rather than higher cost, high-tech approaches (coincidentally, what’s needed when conditions worsen). It’s an argument for funding preventative care, so we don’t need to use these tech-heavy, innovative solutions for care… things that drive up costs.

I agree with the basic premise, but could you imagine someone saying, “no lets keep using this old 386/9mhz computer with 50mb hard drive space and 4mb ram that we bought for $3000 in the mid 90s… new computers are just too expensive.”

My point is that technological innovations should be driving down costs, not bringing them up. When this fails to happen, it is a sure sign of a non-competitive market with insufficient pricing signals going on.

Tyler Cowen says:


The Democrats are right about the need to constrain Medicare expenditures, but the more they attack Republican stupidity and lies, the further they are from understanding why Americans now trust them less with health care reform than before.

This point is well taken. Dems are too focused on bringing down costs without trying to understand why costs are high. Without competition, the only way that I know to bring costs down is by introducing shortages and reducing innovation by by introducing disincentivizing signals to the market. They claim to want to introduce competitiveness through a public or non-profit option, but refuse to take down barriers that prevent organic market competition. Does this make sense?

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