Medical Technology Usually Equals Better Outcomes, Higher Costs

Research on health care costs

The National Bureau of Economic Research, Cambridge, Mass., an independent, nonprofit economic research organization, undertook research into a variety of health care cost-containment issues between September 1995 and May 1997.

During the course of the three-year project researchers:

  • Assembled databases, including claims data from 20 million Medicare patients and 3 million employees and dependents covered by employer-sponsored health plans.
  • Conducted more than 40 studies on a wide array of issues.

Key Findings

Three general themes emerged from their work:

  • The structure of health care policies—whether through Medicare, traditional employer-provided fee-for-service health insurance, or managed care—has both a direct influence on treatment decisions and costs, and an indirect influence on the diffusion of new medical technologies.
  • Increasing use of intensive medical technologies is responsible for most of the growth in medical costs during the last decade.
  • The increasing use of medical technologies has had a substantial effect on improving health outcomes over time, but less frequent use of intensive treatment may have few adverse health consequences and yield significant cost savings.


The Robert Wood Johnson Foundation (RWJF) provided partial support for the project with a grant of $200,000.