Technology—not life expectancy—drives up healthcare costs

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Americans are living longer, but that's not the primary driver behind healthcare spending increases.

Even though Americans are living longer and often spending more on healthcare services later in life, pervasive use of new technology is to blame for burgeoning health costs, according to one economist.

A large portion of healthcare spending is tied to chronic conditions, particularly among elderly patients, and longer life spans translate to more services later in life. But technology is the true driver behind healthcare spending growth, health economist Austin Frakt writes in The New York Times.  

His logic works like this: Although studies show that healthcare spending increases toward the end of life, five additional years of healthy living only delays that spending but it doesn’t significantly add to it.

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Meanwhile, Frakt writes, new, expensive technology is constantly entering the marketplace, making up “as much as two-thirds of per capita healthcare spending growth.” Research shows that new medical tests add to Medicare spending, while genetic tests with questionable benefits cost the government as much as $500 million per year.

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Healthcare spending in the United States reached $3.2 trillion in 2015—nearly $10,000 per person—with a growth rate of 5.8%. Although spending appears to have leveled off in 2016, federal actuaries believe healthcare will make up 20% of the gross domestic product by 2025.