Cost-reducing innovation in health care.

Ever-increasing health care costs undermine expansions in health insurance coverage. Debate about lowering unit costs tends to focus on reducing payment levels for existing products and providers, but such measures are not likely to succeed, given established overhead costs and income expectations. Instead, moderation in health care spending must be sought in new products and processes that use lower-cost materials, staff, equipment, and sites of care. We give examples and sketch the principal regulatory, payment, insurance, and policy design obstacles to the further development and diffusion of cost-reducing innovations.