Why Isn’t Innovation Helping Reduce Health Care Costs?

The United States' national health care expenditures (NHEs) continue to surge, surpassing economic growth rates, with a 1.6 percent higher increase than GDP from 1990 to 2018. Compared to other countries in the Organization for Economic Cooperation and Development, the US demonstrates significantly higher NHE growth relative to GDP (17.2 vs. 8.9 percent). Analysts propose that rising prices and service intensity, rather than utilization rates or demographics, account for this disparity. Despite a thriving innovation ecosystem, cost reduction remains elusive, attributed to a lack of enhanced net productivity. This post examines the root causes, intensified by COVID-19's resource constraints, and advocates low-cost innovation strategies.