Health care policy and the economics of technological changes in the health care industry

The effects of government macroeconomic and health industry specific policies on the process of medical technological innovation between 1960 and 1988 are examined. Between 1960 and 1976, the introduction and expansion of the Medicare/Medicaid programs coupled with rising tax rates (that made employer-based untaxed private insurance programs very attractive) led to an extremely favorable environment for the adoption of all types of new medical technologies. Since 1976, budgetary pressures at all levels of government, coupled with falling tax rates that discouraged private group insurance programs, resulted in an adverse climate for medical technological innovations, especially those that might increase health care costs.<>