Population Aging, Technological Innovation, and the Growth of Health Expenditure: Evidence From Patients With Type 2 Diabetes in Taiwan

Objectives: As populations are growing older, the prevalence of chronic diseases such as diabetes mellitus is rapidly increasing. Meanwhile, many new drugs are introduced each year as a result of technological advances. This study uses diabetes as an example to investigate the relative importance of population aging and technological innovation in accounting for the growth of health expenditures. Methods: The retrospective cohort study was conducted based on claims data covering 1997 to 2006 taken from Taiwan's National Health Insurance. Patients were selected based on whether they received antidiabetic drugs. Growth in health expenditure was decomposed into 3 parts: number of patients, mean treatment cost, and the interaction between the change in the mean treatment cost and the change in the number of patients. Results: The results indicated that 75% of the growth in expenditures for treating diabetic patients is attributable to the effect of population aging, as reflected by the increase in the diabetes prevalence rate (45%) and disease severity (30%). Technological innovation, in the form of treatment substitution (10%) and treatment expansion effects (15%), accounted for only about 25% of the growth in expenditures for treating diabetic patients. Conclusions: Population aging plays a more significant role than technological innovation in driving up health expenditures for the treatment of diabetic patients. This suggests that population aging may contribute significantly to the future growth of the healthcare sector in Asian countries such as Taiwan.