A paper released by the Health Care Pricing Project in December found enormous variability in health care spending for privately insured individuals, both within regions and across the country. Common procedures vary in cost by more than 600 percent among hospitals, even in the same region. Worse, it found that the places where Medicare manages to contain costs are not the same as those where private insurance manages to contain costs. This means that hopes to use Medicare cost containment as a template for reform elsewhere may not bear fruit. The takeaway from all this: Not only do we not know how to contain costs in our health care system; we also do not know where to start looking in order to learn.
A detailed look at the U.S. health care system can be discouraging. Along with the problem of insurance coverage and access to health care, the United States also spends more than any other developed country on health care—more than 17 percent of our gross domestic product, according to the Centers for Medicare and Medicaid Services—outstripping other countries by far. A study by the Kaiser Family Foundation in 2013 found that U.S. health care spending per capita was 42 percent higher than Norway’s, the next highest spender.
Clearly, more research is needed to understand what drives such extreme variations in pricing, which are a sign of basic failures in the health care market. This does not mean the solution is price controls imposed from above. But we cannot continue to accept a situation in which we mandate insurance, then watch helplessly as prices explode out of control for reasons no one understands well enough to avoid.