Cost-Saving and Cost-Increasing Technology-Based Innovations

Cost-Saving and Cost-Increasing Technology-Based Innovations

According to Dewar (2017), a cost-saving technology is a technique that shifts costs downwards in the long run. A good example of cost-saving technology is when a hospital institutes the purchase of more effective, high-quality, and expensive drugs. Although this will increase the costs in the short run, it will go a long way in reducing nondrug expenses for patients in the future. For example, in the case of Medicare beneficiaries, higher drug costs will result in lower non-drug costs, such as out-of-pocket payments.

On the other hand, a cost-increasing innovation in medicine refers to an innovation that increases the cost of treatment of a particular disease. Cost-increasing technologies are adopted in cases where there is no incentive to contain costs. This scenario was common in the U.S. in the 1980s when Medicare and other indemnity insurance parties encouraged cost-increasing technologies coupled with high quality (Higbea & Cline, 2021). A good example of a cost-increasing technology is the application of laparoscopic cholecystectomy surgery for gall bladder removal surgery. The technology has been proven to reduce mortality rates by half across all populations when applied (Dewar, 2017). Also, elderly patients who are operated on using laparoscopic cholecystectomy are likely to stay in specialized nursing homes for a shorter period.

Cost-saving technology is required to address diseases during the early stages. To that end, there are two intervention technologies in the disease life cycle: first and second generation. These technologies are also referred to as halfway and high technology. Halfway technologies are more expensive, yet they are critical to arresting a disease during the early stages (Dewar, 2017). Therefore, cost-increasing innovations are important because they facilitate effective early intervention.

References

Dewar, D. M. (2017). Essentials of health economics. Burlington, Ma Jones & Bartlett Learning Burlington, Ma Jones & Bartlett Learning.

Higbea, R., & Cline, G. (2021). Government and policy for U.S. health leaders. Jones & Bartlett Learning.

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Describe the difference between cost-saving and cost-increasing technology-based innovations.

Provide an example of each and analyze why a cost-increasing innovation would continue to be used.