It’s (at Least Partly) the Prices

I have previously written about the cost of health care in the United States.  As a society, we spend a lot more than any other “Western” countries with developed economies, regardless of whether one measures health care expenditures as a percentage of GDP or as a per capita figure.

Obviously, the amount of money spent on health care (or anything else, for that matter) depends on both the volume of services – how much stuff is done – and the unit price – how much each activity costs. A lot of attention has been paid (no pun intended) to the former, and with good reason.The Dartmouth Atlas of Health Care provides overwhelming evidence of the geographic variation in health care services in the United States. In the absence of any corresponding differences in patient populations or health outcomes, it is hard to escape the conclusion that some regions are getting more care than they need. The health services research literature refers to this as “overuse,” and a particularly colorful profile of why it occurs and what it looks like at the ground level of real patients and real doctors was provided a few years ago by Atul Gawande in the New Yorker.

More recently, attention has focused on the unit costs. An entire issue of Time Magazine was devoted to the bizarre billing practices of American hospitals, and the New York Times has been running a series called “Paying Till it Hurts.” The most recent installment detailed how much more expensive joint replacement surgery is in the United States than it is in Europe.

Bottom line: fees for hospital services, physician services and the joint implants themselves are all dramatically more expensive in the States than they are just about everywhere else.

This is important. Lowering our total health care spend – which we must do – is not going to be accomplished just by reducing the frequency of unneeded services but will also, inevitably, involve lowering the price of goods and services. The challenge, of course, is that “reducing costs” for those paying the bills is synonymous with “reducing income” for those providing the goods and services. This is not going to be easy, or fun for providers. In fact, I think it is fair to say of the changes ahead that “there will be blood.”

What do you think?

7 thoughts on “It’s (at Least Partly) the Prices

  1. Whether it is unit cost or over-utilization, pricing transparency must be one part of the solution. The present absence of transparency creates confusion and prevents purchasers/users of health care services from voting with their pocketbooks – a form of “natural selection” that has worked so well for most parts of our economy.

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