Pope: Medicare’s rising costs driven more by new medical technology than demographics

At the Competitive Enterprise Institute event, Chris Pope argued that Medicare’s long-term cost trajectory reflects program incentives that reward the adoption and payment for new medical technologies rather than merely an aging population.

"Because Medicare pays for whatever new medical services and procedures and drugs anyone can invent, well what are the easiest ones to invent? The ones that aren't hugely effective, the ones that are very profitable," Pope said. He told the audience that this incentive structure, combined with automatic benefit escalation, helps explain why costs keep rising even when demographic effects alone do not.

Pope said this is a design problem of the entitlement and that reform should focus on payment design and limiting incentives that produce low-value care rather than attributing the cost curve solely to the baby-boom cohort.