On Friday I caught a short segment on CNBC about a device that apparently kills blood borne viruses using light. The idea is that a patient infected by a serious disease (AIDS, Hepatitis, SARS), would have their blood drawn out and passed through this machine, and the machine would shine specific frequencies of light on the blood to kill the virus. All of this happens, apparently, without effecting anything else in the blood. I’m a bit skeptical, but the video still reminds me why health care costs eventually will start to subside.
While double digit increases in short-term health care costs seem inevitable, the likelihood is that we will hit a fulcrum point in the not-too-distant future, where advances in technology start to significantly reduce costs.
As Ray Kurzweil has so eloquently explained, technology is, by definition, deflationary. The cost of everything from TVs to iPhones, drops in price by 50% every 12-18 months. Ignoring inflation in any specific currency, this means that for every $1, we will get twice as much value (or the same value at half the cost) from a given technology in 12-18 months.
Health care is very technologically driven, and therefore should be bound by similar trends. The problem is that there are very definitive barriers that have obscured technology-driven deflation.
The first is that health care technology allows us to live longer. Technically, this means we are getting more “value” in the form of “longer life”. However, this “longer life”, is currently accompanied by greater total demand for health care. Since medicine is largely socialized for the sickest citizens, people living longer without paying more, simply translates into overall rising health care costs.
The other abstractions in health care are regulation and price controls (this comes in the form of direct regulations, patents, and government ownership of key pieces of the health care industry). This isn’t to say that regulation, redistribution of wealth, patents, or socialization of medicine don’t serve positive social purposes, but they do retard raw growth and innovation.
Despite these “negative” forces, health care technology continues to give us more for less. You used to have to have a surgery to fix an ulcer, now you take a pill. That pill may be expensive, but it’s a lot cheaper and more beneficial to the patient than a surgery.
The costs of AIDS medications and treatment today can range up to $30,000 per year. One day we will find a cure, whether it be a machine that uses light to kill the virus, a pill that selectively targets the virus, or a gene therapy that blocks the virus’ ability to replicate. In any case, the treatment and cure will be very expensive, but the relative cost of that treatment will be exponentially lower than the alternative today.
At some point our technology will hit an inflection point, where growth becomes even more exponential, and our technology starts solving significant and costly problems with simple, efficient, and ultimately cheaper solutions. As this happens, medecine will make us all healthier and less burdensome to the health care system. At the same time the declining costs of treatments will further reduce overall costs. Call it “peak health care costs”, there will be a day when technology solves the problem of healthcare costs.
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