Essential to a complete understanding of the comparative effectiveness of new medical technologies in improving population health care outcomes is a complete elucidation of how new technologies increase national health care costs. New technology is widely considered by health economists to be the leading driver of rising U.S. health care costs, yet the precise mechanisms by which new technologies produce cost growth are uncertain. It is likewise uncertain how local-area health care market factors have affected cost increases due to new technology. Finally, it is not well understood how national policy initiatives such as Medicare's Coverage with Evidence Development program, changes in diagnosis-related group (DRG) assignment, and modifications in DRG reimbursement rates have affected the rate of growth in Medicare costs. Implantable cardiovascular devices are among the most costly therapies covered by the Medicare program, and recent Centers for Medicare and Medicaid Services coverage decisions for drug-eluting coronary stents (2003) and carotid arterial stents (2004), as well as expansions of coverage indications for implantable cardioverter defibrillators (2003 and 2005), potentially have entailed billions of dollars in additional annual expenditures for the Medicare program. As such, a clearer understanding of how the introduction of these devices into clinical practice affected Medicare cost growth can critically inform the forecasting of future Medicare expenditures, and thus inform decisions regarding the comparative effectiveness of these new technologies (and similar, future innovations) relative to costs. In this project, we will analyze national Medicare claims data from 2001- 2008 in pursuit of the following goals: (1) to measure the degree to which these 3 new cardiovascular technologies have increased Medicare expenditures, and to assess the proportion of the cost growth that can be attributed to the increases in the direct cost of the technology, expansion in the volume of care, changes in the characteristics of patients undergoing treatment, increases in complementary health care expenditures, and changes in downstream costs;(2) to determine how cost growth due to these 3 new cardiovascular technologies has varied across small geographic areas, and to assess the proportion of technology-related cost growth that is attributable to market-level factors such as the intensity of hospital competition, the presence of cardiac specialty hospitals within a health care market, or the presence of hospitals there were involved in clinical trials of the devices;and (3) to explore how differences in Medicare's coverage decisions and policies regarding these three technologies, including differing institutional requirements for reimbursement as well as variation in the use of new diagnosis-related groups for hospital reimbursement, affected growth in Medicare costs.

Public Health Relevance

Health care cost increases present a substantial challenge to the future fiscal stability of the Medicare program, and new health care technology is the leading cause of health care cost increases. This project will examine in detail how new technology increases health care costs, and it will investigate how cost growth due to new technology is influenced by conditions in local health care markets as well as Medicare's coverage policies.

National Institute of Health (NIH)
Agency for Healthcare Research and Quality (AHRQ)
Research Project (R01)
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Health Systems Research (HSR)
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Hagan, Michael
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University of Pennsylvania
Internal Medicine/Medicine
Schools of Medicine
United States
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