What do we mean by “value” and why is it so important?
The escalation of healthcare costs is one of the major economic and political issues of our time. The problem is most apparent in the United States, where healthcare as a share of the economy has more than doubled over the past 35 years. Spending on health accounted for 7.2 percent of the nation's gross domestic product (GDP) in 1970, expanded to 16 percent in 2005, and is projected to be as high as 20 percent of GDP by 2015.
Simply put, the US economy cannot sustain this spending trajectory, which has outpaced GDP growth for years (see Figure V1). The problem is not just straining the federal budget: state and local governments have been forced to reduce support for education, infrastructure, and other critical expenditures as they struggle to fund Medicaid and other health programs. In the private sector, the cost of employment-based health insurance is one of the main reasons workers have seen their wages stagnate.
Despite the fact that the US spends two-and-a-half times more per capita on health than most developed countries, it does not necessarily provide the best care to its citizens. In 2000, when the World Health Organization ranked the health systems of its 191 member states for the first time ever, the US found itself in 37th position. In a more recent study that compared the US to Australia, Canada, Germany, the Netherlands, New Zealand, and the United Kingdom on measures of quality, efficiency, access to care, equity, and the ability of citizens to lead long, healthy lives, America occupied last place. As the report pointed out, “While there is room for improvement in every country, the US stands out for not getting good value for its healthcare dollars.”
Against this backdrop, economists, researchers, and policy makers alike have pointed to medical technology as a dominant factor driving increased health expenditures in the US.