Health Affairs, 27, no. 6 (2008): 1619 doi: 10.1377/hlthaff.27.6.1619 © 2008 by Project HOPE	New Online   Senate Health Reform Bill   Rewarding Providers   Public Option Policy Brief   Health Reform & Abortion   Delivery System Reform

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New Technology

PROLOGUE

Buying New Technology

On the other hand, as a nation we face quandaries in trying to figure out what new technologies are worth and what to pay for them. Producers deserve a reward for innovation, so prices should be high enough to reflect that—unless the innovation isn’t what it’s cracked up to be and doesn’t really produce better care or outcomes. Once prices are set, insurance tends to lock them in, and they don’t necessarily fall, even if competitors with similar technologies begin to crowd the field. Newer innovations can quickly make recent ones obsolete and upset price stability. Providers who adopt the technology also must be paid, and are at risk if prices are set too low or demand is low because of uncertainty. Thus, they may delay adopting new technologies until the payment—and the benefits—are assured.

When it comes to technologies used in inpatient hospital care, Medicare deals with this quandary with a blunt instrument: prospective diagnosis-related group (DRG) payments based on average treatment costs. Updating DRG weights is one way to adjust payments to account for advances in technology, but this process usually lags a couple of years behind the technology’s introduction.

During that period—or before Medicare makes a so-called national coverage determination—the evidence for what a new technology is really worth is usually scant, as Peter Neumann and colleagues report. Restricting coverage to particular patients while waiting for more evidence from medical studies is one way to deal with the uncertainty.

Kalipso Chalkidou and colleagues explore the value of "keeping one’s options open" and suggest linking coverage decisions to enrollment in clinical trials, as Medicare has already done in some cases. While this is happening, new technology add-on payments (NTAPs) can cover the additional cost of eligible technologies. Alexandra Clyde and colleagues describe experience with this program and ways to improve it.

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