Endogenous Technology Adoption and Medical Costs

Abstract

Despite the claim that technology has been one of the most important drivers of healthcare spending growth over the past decades, technology variables are rarely introduced explicitly in cost equations. Furthermore, technology is often considered exogenous.Using 1996-2007 panel data on Swiss geographical areas, we assessed the impact of technology availability on per capita healthcare costs covered by basic health insurance while controlling for the endogeneity of health technology availability variables. Our results suggest that medical research, patent intensity and the density of employees working in the medical device industry are influential factors for the adoption of technology and can be used as instruments for technology availability variables in the cost equation. Our results are similar to previous findings: CT and PET scanner adoption is associated with increased healthcare costs while increased availability of PTCA facilities is associated with reductions in per capita spending. Nevertheless, our results suggest that the magnitude of these relationships is much greater in absolute value than that suggested by previous studies which did not control for the possible endogeneity of the availability of technologies.

Changing payment instruments and the utilisation of new medical technologies

“…This assumption is relaxed to some extent in fixed effects models, since only time-variant unobserved factors need to be considered. Possible unobserved factors that coincide with utilising DEB could be a growing evidence of the effectiveness of DEB and the availability of the technology [49]. In fact, the European guideline for myocardial revascularisation from 2010 suggests that DEB "should be considered for the treatment of instent restenosis" after prior treatment with bare metal stents.…”

A moneymaking scan: Dual reimbursement systems and supplier‐induced demand for diagnostic imaging

“…Finkelstein, Gentzkow, and Williams (2016) find that geographic variations in imaging use is largely determined by differences in supply rather than demand factors. The supply density of advanced imaging equipment has also been used as a proxy of technology adoption and found to drive healthcare expenditures on an aggregate level (Chandra & Skinner, 2012; Lamiraud & Lhuillery, 2016). Patients are also more prone to demand inducement for diagnostic, noninvasive, and potentially informative procedures, especially under insurance (Zweifel et al, 2009).…”