Why a Healthcare Spending Squeeze May Stimulate Biomedical Innovation

There is now a concerted pushback against ever-increasing healthcare costs. Insurers are refusing to cover expensive procedures, and hospitals are eschewing some of the newest technologies in favor of older, cheaper ones. American citizens are being asked to pay higher premiums and deductibles, and politicians are reflecting their discontent.

One might think that this is a toxic environment for biomedical innovation. But a paper by James C. Robinson, published in the journal Health Affairs, argues convincingly that an era of belt-tightening may actually serve to spur innovation.

Previously, the glut in funding encouraged incremental improvements in technology, which offered only marginal benefits while commanding top dollar. Now, with fewer dollars being chased, companies will be forced to maximize the value of their innovations. In this environment, newer products are more likely to be truly revolutionary.