U.S. Medical Prices Highest In the World
Posted by: Cathy Arnst on November 02
There is a set of charts flying around the policy blogosphere today that starkly illustrates why the U.S. devotes almost 18% of its gross domestic product to health care spending, while other wealthy nations spend no more than 10% or 11%: Because we pay far, far more per unit of care than any other country.
The 36-page document was put together in September by the International Federation of Health Plans, which represents 100 insurers in 31 countries. It consists of a number of charts that show the difference between what the U.S. pays for any number of medical services, and what other industrialized countries pay.
Other countries pay less because their governments set national prices, even in those nations with private insurers. Also, no other country has the range of fees for a single procedure that is seen in the U.S. bars. Of course, doctors typically earn less as a result, hospitals bring in less revenue, and drug prices are cheaper. But the quality of care in other nations is rated higher than the U.S. on any number of measures. Also, note the range of prices in the U.S., another quirk of the American medical system, where each provider and payer negotiates their own set or prices.
Washington Post columnist Ezra Klein, who first posted the charts, was alerted to them byGeorge Halvorson, CEO of Kaiser Permanent the nation's largest non-profit insurer. Halvorson complained that the health care debate rarely touches on the price we pay: "A health-care debate in this country that isn't aware of the price differential is not an informed debate." Klein continues:
As Halvorson explained, and academics and consultancies have repeatedly confirmed, if you leave everything else the same -- the volume of procedures, the days we spend in the hospital, the number of surgeries we need -- but plug in the prices Canadians pay, our health-care spending falls by about 50 percent.
Over at the blog The Incidental Economist, Austin Frankt points out that any number of studies support the Federation of Health Plans conclusions, including a 2007 report by the Congressional Research Service. Says Frankt:
The high U.S. spending on health care relative to other OECD nations must be due to relatively higher prices or greater health care consumption or both. The consensus in the academic literature is that price, not quantity, is to blame.
Or as Princeton Economist Uwe Reinhardt and collaborators put it so succinctly: "It's The Prices, Stupid."