US leads the world in healthcare pricing

January 12th, 2015

We’ve all gotten those medical bills in the mail for tests, or perhaps outpatient procedures, that are itemized down to the smallest thing, even ice packs used. And that’s just the bill from the facility – just wait till the bills from the doctor and, if applicable, the anesthesiologist, arrive. And we’ve all wondered – where do the prices come from? Who sets them, and how are the numbers calculated? Is there a standard they follow?

A June 1^st New York Times article tries to shed light on some of these questions, and adds even more fuel to the healthcare cost debate fire by showing the vast price difference between the US and other countries for routine tests or medications. For example, the average US price for a colonoscopy is $1,185 (though it can be as high as $4,500 or even $8,500 in some parts of the country), but is $655 in Switzerland. A hip replacement in the US can be $40,000 on average, but just $7,731 in Spain. A Lipitor prescription in New Zealand will put you back around $6, but can be $121 here. In other words, healthcare spending in the US is higher than in any other industrialized nation.

So why the huge disparities? The NYT story uses the colonoscopy as an example, citing CDC data stating that more than 10 million people have the procedure each year, with costs adding up to around $10 billion. One reason for cost difference is location – many colonoscopies are performed in outpatient surgery centers rather than a doctor’s office, driving up the cost. Hospitals and facilities haggle with insurers to hammer out a price that favors each. Even business plans to maximize revenue and “turf battles” between specialists are cited. Plus, as we know, the US government doesn’t regulate pricing except for Medicare and Medicaid services. Other countries with private healthcare, the article points out, set rates with insurance companies or just set a nationwide rate.

The report certainly sheds light on the way healthcare services are priced, and reasons for disparities between the US and other countries. But will it spark any major debate or price changes or regulations? I don’t see it happening. What do you think?