Why are American health care prices so crazy?

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.

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Roberto Blum
3 years ago
Not only the most expensive, but the worst among developed countries. Even a poor country like Cuba with 4.76 infant deaths per 1000 births has better results than the U.S. (5.2 per 1000). Life expectancy at birth in Cuba is 74 for males and 78 years for females, In the U.S., the numbers are 75 and 79. We should be doing much better but our health system is a disgrace.
Joseph J Dunn
3 years ago
"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." I agree. If the point of all this health care spending is better health, we ought to focus on steps that would help people avoid sickness and suffering and the need for health care spending. According to the Organization for Economic Co-operation and Development (OECD) Health at a Glance 2013, obesity and related health conditions drive health care costs in developed nations. Obesity is a known risk factor for hypertension, high cholesterol, diabetes, cardiovascular diseases, respiratory problems (asthma), musculoskeletal diseases (arthritis) and some forms of cancer. In its Health Care Costs: A Primer published in May, 2012, the Henry J. Kaiser Family Foundation states that “increases in disease prevalence, particularly chronic diseases such as diabetes, asthma, and heart disease, coupled with the growing ability of the health system to treat the chronically ill, contribute to the high and growing levels of health spending.” www.kff.org/health-costs/issue-brief/health-care-costs-a-primer The United States has the highest adult obesity rate among the 34 OECD countries, at 36.5 percent. The average adult obesity rate among OECD countries is 22 percent. Norway’s adult obesity rate is 10 percent—73 percent lower than the U.S. Obesity has been identified as the risk factor having the strongest association with diabetes, and our high obesity rate is affecting our health statistics and costs. Norway’s adult diabetes rate is 4.7 percent; the U.S. rate is 8.3 percent. In 2011, Norway had 61 percent fewer hospital admissions for diabetes, per 100,000 of population, than the U.S. The obesity rate in Sweden, at 11 percent and Sweden’s diabetes admissions rate is 42 percent lower than the U.S. rate. Hospitalizations are expensive, and disrupt the patient's work and family life. And diabetes can lead to chronic kidney disease and, over time, to kidney failure, also known as end-stage renal disease (ESRD). To stay alive, a person suffering ESRD requires dialysis treatments several times each week or a kidney transplant. In the U.S., there are 1,870 persons suffering from ESRD per million of population. In Norway, the rate is less than 1,000 per million. The average cost of dialysis treatment is $60,676 per year, and lifestyle constraints that many patients find terribly depressing. For a kidney transplant, the cost of surgery and first year of treatment averages $99,000. Follow-up exams, anti-rejection medication, etc., will cost on average $12,000 every year for the rest of the patient’s life. Do we really need another committee, another study, another law?
James Richard
3 years ago
The For Profit Health Care system we have is what's raising havoc. Its going to break as health insurance raises their premiums and deductibles to the point that customers will merely be paying premiums and getting little in return when they need it.


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