Anything written by Reason science correspondence Ronald Bailey is worth reading, and his "Does High-Tech Medicine Mean Higher Health Care Costs?" is no exception.
He analyzes a new study by economist Frank Lichtenberg published by the NBER and finds that the answer is "no."
FIrst of all: "[L]ife expectancy increased faster in states that more rapidly adopted advanced diagnostic imaging techniques, newer drugs, and attracted an increasing proportion of doctors from top medical schools." But: there was no correlation between increases in spending on high-tech and new drugs and increases in per capital health care expenditures.
Lichtenberg's tentative explanation is that "while newer diagnostic procedures and drugs are more expensive than their older counterparts, they may reduce the need for costly additional medical treatment."
Bailey's translation: "In other words, high-tech medicine may initially cost more, but it reduces spending in the long run, while increasing the life expectancies of patients."
So contrary to the fashionable CW, innovation in pharmaceuticals and devices is a remedy for the cost inflation, not a cause.
P.S. Shrinkwrapped also likes Bailey's article, and adds:
[K]eep in mind that every government run healthcare system treats innovations as expenses to be minimized rather than as opportunities to enhance life. This is inevitable and one of my major reasons for opposing the current plans for fundamental reform in how we finance our healthcare.
I concur - see Saving the Goose: Intellectual Property and Follow-On Biologics (FOB) (pp.13-14).