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In March 2010, the US Congress passed and President Obama signed a historic new health care legislation, the Patient Protection and Affordable Care Act (PPACA). The full impact of this complex bill on medical practice and US healthcare expenditures will likely not be clear for many years. The passage of this legislation was preceded by a vigorous public debate on the US healthcare system and options for its reform. Complex arguments about the best way to organize, deliver, and pay for healthcare became the stuff of the daily news reports and editorials. Major participants in the healthcare industry and other interest groups jostled to advance their perspectives before the US Congress and the court of public opinion. One major reason for all this attention and the justification given for both supporting and resisting passage of this legislation was a widespread concern about the current and future costs of healthcare and tremendous uncertainty about the best way to control these costs. According to the Centers for Medicare and Medicaid Services (CMS), the United States spent 17.5% of its gross domestic product (GDP) on healthcare in 2014, amounting to approximately $3 trillion.1 Approximately 52% of this expenditure went for hospital care or physician/clinical services. Drug therapy accounted for another 10%. While the rate of growth in healthcare spending has varied in recent years, the trajectory for the national healthcare bill will continue to be upward for the foreseeable future. However, despite leading the world in healthcare spending, the United States has a system with which no one seems happy.2

Four major reasons can be offered to explain why healthcare spending is expected to keep increasing: (1) technological innovations that improve medical care3—the care of the cardiovascular patient in 2017 is vastly different (and largely better) than it was in 1980, but innovation in diagnosis and therapy generally increases costs relative to the prior patterns of care, as is reviewed in the second part of this chapter; (2) the aging of the population—an issue for all developed countries and one that has just begun to manifest itself (the vanguard baby boomers born in 1945 reached retirement age in 2010); (3) inflation, which refers to an increase in the cost of the same good or service (contrasted with an improved medical care service described in the first reason, above); and (4) raised expectations of the public regarding what medicine can and should offer them when they become ill, in part as a result of the global information revolution created by the Internet and search engines such as Google. Patients are no longer dependent on their doctor to tell them what is possible in a particular medical situation, and there appears to be no limit to the human desire to subdue morbidity and mortality technologically.

“Disruptive innovation” has been suggested as a guide to solving the ever rising healthcare cost dilemma. First proposed by Clayton Christensen in ...

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