As Mr Wolfman stepped out of the cold into Philadelphia’s bustling 30th Street train station, a billboard near the entryway caught his attention. The blurred image of an athletic bicyclist filled the background while a bold-faced statement proclaimed, “THE WIND IN YOUR FACE IS WORTH PROTON THERAPY.” Similar ads adorned the walls between the ticket counter and the waiting area. One showed a man and woman gleaming over a candle-lit dinner. Another, his favorite, showed an ecstatic pair of octogenarians dancing the night away. “SATURDAY NIGHT JITTERBUG IS WORTH PROTON THERAPY.”
Mr Wolfman’s mind wandered to the recent news special he saw on TV. Not too long ago, just a few miles away, a futuristic $150 million proton therapy center opened. The special said the new facility spanned the length of a football field and contained some of the most sophisticated medical technology ever created. To destroy cancer cells at the microscopic level, they assembled more than 200 tons of superconducting magnets and computer-guided subatomic particle accelerators.
Neither the news special nor the billboards at 30th Street Station mentioned whether all that equipment was truly necessary. They did not mention that each treatment with proton therapy is somewhere between two and six times as expensive as the alternative form of radiation. They did not mention that in many cases there is no evidence that proton beams work better than previously available, less expensive methods.
So Mr Wolfman chuckled to himself. The jitterbugging octogenarians reminded him of his own mother and father. As he stepped off the platform to board his train he marveled, “It’s amazing what modern medicine can do.”
We expect new technologies to be more expensive than their older counterparts. Of course the iPhone 6 is more expensive than the iPhone 5. It is faster. It has a better camera. It performs better. What we do not expect is to pay more money for iPhone 5-level performance year after year. This is because in almost every industry, technology that improves performance renders older technology less expensive. In 1965, Intel founder Gordon Moore observed that every 2 years the number of transistors in a computer processor doubles and the cost of computing falls by half.1 This observation, commonly referred to as “Moore’s law,” has since been extended to describe the rate at which technology impacts economic productivity in a broad range of settings.
Healthcare, as an industry, appears to be an exception to Moore’s law. Rather than falling, the costs of healthcare are rapidly rising. Meanwhile, the performance of our healthcare system has improved at a much slower pace. Consider life expectancy as one measure of health system performance. Over the last 50 years, the average US life expectancy has risen by 14%, from 69 to 79 years old. Meanwhile, the fraction of total spending in the United States that is devoted to healthcare has ...