Can We Talk Price?

Over at Swampland, someone helpfully provided a link to National Geographic post in support of my arguments that graphically demonstrates the fact that the US consumer is getting ripped off by her/his profiteering health care system ( link to NatGeo ), but unfortunately, the copy then had to go like this:

The United States spends more on medical care per person than any country, yet life expectancy is shorter than in most other developed nations and many developing ones. Lack of health insurance is a factor in life span and contributes to an estimated 45,000 deaths a year. Why the high cost? The U.S. has a fee-for-service system—paying medical providers piecemeal for appointments, surgery, and the like. That can lead to unneeded treatment that doesn’t reliably improve a patient’s health. Says Gerard Anderson, a professor at Johns Hopkins Bloomberg School of Public Health who studies health insurance worldwide, “More care does not necessarily mean better care.” —Michelle Andrews

No, no, no, no.

Thanks Michell Andrews!

Thanks for the graphic, but it's unfortunate that National Geographic had to explain the discrepancy in cost as a function of use, as opposed to a function of price.

It fits a very neat storyline that contains a great deal of truth, but the fact that fee-for-service leads to unnecessary, i.e. wasteful costs doesn't explain the difference between the price of an MRI in Japan and the price of that procedure in Texas.

It isn't just that there is an abundance of inefficiency in delivery, it's that what's being delivered costs more here than anywhere else.

Take, for example, prescription drug pricing ( link to Kaiser Foundation ):

In a comparison of the 20 prescription drugs most commonly prescribed to Medicare beneficiaries, Families USA found that the lowest prices available through the Medicare cards for 10 of the medications were at least 50% higher than prices negotiated by VA, according to Families USA Executive Director Ron Pollack.

The study also found that the lowest drug card price for Lipitor, a cholesterol-lowering medication and the most frequently prescribed drug for seniors, was 59% higher than the price available through VA. According to the study, the Medicare drug card price was 46% higher than the VA price for cholesterol-lowering drug Zocor, 56% higher for acid reflux treatment Prevacid and 65% higher for blood pressure medicine Norvasc. VA discounts also exceeded Medicare drug card prices for the other 10 drugs, although only by 7% in one case (Hartford Courant, 6/3).

Even within the United States, even within Federal entitlement programs there are discrepancies between the prices paid for identical prescription drugs.

Extending the price comparisons internationally, even to our close neighbors, leads to more evidence of inflationary US prices:

One of the most important differences between the two countries is the much higher cost of drugs in the United States. In the U.S., $728 per capita is spent each year on drugs, while in Canada it is $509.[82] At the same time, consumption is higher in Canada, with about 12 prescriptions being filled per person each year in Canada and 10.6 in the United States.[84]

The main difference is that patented drug prices in Canada average between 35% and 45% lower than in the United States, though generic prices are higher.[85] The price differential for brand-name drugs between the two countries has led Americans to purchase upward of $1 billion US in drugs per year from Canadian pharmacies.[86]

But it's not just Canada, and it's not just prescription drugs.

In every other OECD country almost every type of health care consumable, e.g. hospitals, medical procedures, prescription drugs and laboratory tests is less expensive than in the US, while their use is as high or higher than ours.

If we simply over-prescribed, and over-tested, and over-treated because of fee-per-service inefficiencies, then we would probably see exemplary countries like Japan doing far less in comparison, wouldn't we? But that just isn't the case ( link to the Washington Post ):

The world champion at controlling medical costs is Japan, even though its aging population is a profligate consumer of medical care. On average, the Japanese go to the doctor 15 times a year, three times the U.S. rate. They have twice as many MRI scans and X-rays. Quality is high; life expectancy and recovery rates for major diseases are better than in the United States. And yet Japan spends about $3,400 per person annually on health care; the United States spends more than $7,000.

Unfortunately, the idea that there are wide price discrepancies between what Americans pay and what everybody else pays seems to be very, very confusing for reporters. It's as if they believe that it's still 1980, and the dollar should buy them vast quantities of quality merchandise in quaint old Europe, and when it doesn't anymore, when even the Canadian Loonie has been worth more than the dollar for almost a decade, they can't get their minds around it.

The problems with the United States' system are many, from an over-abundance of paper-pushing to a wildly uncoordinated supply chain, and yes, fee-for-service is a part of the high cost equation.

But the basic facts of the matter are that a health care apple in one part of Texas can cost $10 compared to a health care apple in Hawaii costing $7, while a health care apple in Japan costs them $3.60. It's not the cost of insurance against the cost of health care apples that's bankrupting Medicare and the private system, just the price of the apples themselves.

Prices are what's wrong with health care in the United States. Prices are what make fee-for-service unsustainable here. Prices are what will ultimately drive all insurance --Medicare and private-- into the ditch.

The question is: why is it so hard for reporters to say the word "price" when talking about health care costs? Why is it so hard for them to comparison shop for MRI's around the wealthy world, and then tell the American people if we're actually getting a good price --or if we're getting ripped off?