Skip to main content
Subscribe
  • Sign Up Free
  • Login
  • Subscribe
  • News
    • Current News
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • Digital Health
    • Transformation
    • ESG
    • People
    • Regional News
    • Digital Edition (Web Version)
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Midwest
    • Northeast
    • South
    • West
  • Opinion
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
  • Events & Awards
    • Awards
    • Conferences
    • Galas
    • Virtual Briefings
    • Webinars
    • Nominate/Eligibility
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Excellence in Governance
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top Innovators
    • Diversity in Healthcare
      • - Luminaries
      • - Top 25 Diversity Leaders
      • - Leaders to Watch
    • Women in Healthcare
      • - Luminaries
      • - Top 25 Women Leaders
      • - Women to Watch
    • Digital Health Transformation Summit
    • ESG: The Implementation Imperative Summit
    • Leadership Symposium
    • Social Determinants of Health Symposium
    • Women Leaders in Healthcare Conference
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Diversity Leaders Gala
    • Top 25 Women Leaders Gala
    • - Hospital of the Future
    • - Value Based Care
    • - Hospital at Home
    • - Workplace of the Future
    • - Digital Health
    • - Future of Staffing
    • - Hospital of the Future (Fall)
  • Multimedia
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
  • Data Center
    • Data Center Home
    • Hospital Financials
    • Staffing & Compensation
    • Quality & Safety
    • Mergers & Acquisitions
    • Data Archive
    • Resource Guide: By the Numbers
    • Surveys
    • Data Points
  • Newsletters
  • MORE+
    • Contact Us
    • Advertise
    • Media Kit
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Providers
December 26, 2013 12:00 AM

Market for medical equipment, health spending likely to change as ACA expands, economist says

Melanie Evans
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    Medical equipment patents in the U.S.—and health spending—increased with the nation's public expansion of health insurance in the mid-1960s, a new research paper says.

    But that may not happen again as millions of Americans get new coverage under the healthcare reform law, according to the paper's author, Jeffrey Clemens, an assistant professor of economics at the University of California San Diego.

    That's because the market that fostered new patents (with higher price tags) after the creation of Medicaid and, more importantly, Medicare, is not the same marketplace as what's likely to emerge from the Patient Protection and Affordable Care Act, Clemens said.

    The coverage expansion that begins Jan. 1 is similar in one way to that historical analogue. With more insurance coverage, more households will pay less for medical care. Medicaid, the safety net insurance for the poor, and Medicare, federally funded insurance for the elderly and disabled, slashed the cost of hospital or clinic visits for patients who were previously uninsured and paid medical bills from their own pockets. Households paid 35 cents of every dollar spent for hospital and physician care in 1960, Clemens reports. By 2005, it was 5 cents.

    What households spend “out-of-pocket” is also expected to drop for those who gain insurance under the Affordable Care Act. (Out-of-pocket spending is projected to drop 1.5% next year after an increase of 2.7% this year and 4.1% in 2012.)

    This creates a potential consumer market for new medical equipment. But that market also depends on how well insurance pays for doctors to use medical equipment and what incentives exist for innovation, Clemens said in an interview.

    Medicare—which insured 49.4 million this year—encouraged both the use and development of new technology, he said, because it paid by volume and cost. That gave doctors an incentive to do as much as possible, and innovators didn't have to worry about the price of new developments.

    New patents flourished in areas such as surgery, where the doctors who use medical equipment might develop or influence new designs, Clemens wrote. U.S. medical equipment patents outpaced development abroad and other domestic innovation by 40% to 50% after the introduction of Medicare and Medicaid, he found. That also added an estimated 15% to U.S. health spending in hospitals and clinics.

    But Medicaid did less to foster innovation because of its less-generous payments. And the upcoming expansion relies in part on an increase in Medicaid enrollment.

    The incentive for innovation under Medicaid will depend on how physician-entrepreneurs respond where Medicaid both expands and operates under managed-care contracts.

    Not all states opted to expand Medicaid under the health reform law. However, Medicaid managed care has grown increasingly common. Two-thirds of Medicaid enrollees were covered by a managed-care plan as of 2012, according to the Henry J. Kaiser Family Foundation. Managed care, unlike models that reimburse providers for each procedure, test or visit, known as fee-for-service, typically pays a lump sum per patient. Doctors have an incentive to treat patients as efficiently as possible to hold costs below the lump sum amount because doctors keep the difference.

    That could encourage productivity-boosting, cost-saving innovation because, as Clemens put it, managed care “pays for cost effectiveness.”

    Others will gain insurance in the private market through the Affordable Care Act's new marketplaces. Again, innovation will depend on how much and how these marketplace plans pay doctors, and that remains largely uncertain. Generous fee-for-service plans could incentivize innovation that increases both quality and cost, he said. Stingy fee-for-service may yield no innovation incentive at all. But payments with an incentive for efficiency, such as managed care, could promote more cost-effective innovation.

    The 2010 law also introduced some experiments with Medicare reimbursement, such as accountable care, that could promote cost-saving innovation. Clemens said it's too early to judge their impact.

    Follow Melanie Evans on Twitter: @MHmevans

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    hospital mergers roundtable
    CEOs sound off on mergers, healthcare disruptors
    About Fresh
    Nonprofit helps hospitals connect patients with healthy food
    Most Popular
    1
    More healthcare organizations at risk of credit default, Moody's says
    2
    Centene fills out senior executive team with new president, COO
    3
    SCAN, CareOregon plan to merge into the HealthRight Group
    4
    Blue Cross Blue Shield of Michigan unveils big push that lets physicians take on risk, reap rewards
    5
    Bright Health weighs reverse stock split as delisting looms
    Sponsored Content
    Modern Healthcare A.M. Newsletter: Sign up to receive a comprehensive weekday morning newsletter designed for busy healthcare executives who need the latest and most important healthcare news and analysis.
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • News
      • Current News
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • Digital Health
      • Transformation
        • Patients
        • Operations
        • Care Delivery
        • Payment
      • ESG
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition (Web Version)
    • Opinion
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Events & Awards
      • Awards
        • Nominate/Eligibility
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Excellence in Governance
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top Innovators
        • Diversity in Healthcare
          • - Luminaries
          • - Top 25 Diversity Leaders
          • - Leaders to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Conferences
        • Digital Health Transformation Summit
        • ESG: The Implementation Imperative Summit
        • Leadership Symposium
        • Social Determinants of Health Symposium
        • Women Leaders in Healthcare Conference
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Diversity Leaders Gala
        • Top 25 Women Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Hospital at Home
        • - Workplace of the Future
        • - Digital Health
        • - Future of Staffing
        • - Hospital of the Future (Fall)
      • Webinars
    • Multimedia
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • Data Center
      • Data Center Home
      • Hospital Financials
      • Staffing & Compensation
      • Quality & Safety
      • Mergers & Acquisitions
      • Data Archive
      • Resource Guide: By the Numbers
      • Surveys
      • Data Points
    • Newsletters
    • MORE+
      • Contact Us
      • Advertise
      • Media Kit
      • Jobs
      • People on the Move
      • Reprints & Licensing