Not Your Ordinary Marketplace

Some takeaways:

Whether directly from their wallets or through insurance policies, Americans pay much more for almost every interaction with the medical system.

High prices mostly result not from top-notch patient care, but from business plans seeking to maximize revenue; haggling between hospitals and insurers that have no relation to the actual costs of performing the procedure; and lobbying, marketing and turf battles among specialists that increase patient fees.

The United States spends about 18 percent of its gross domestic product on health care, nearly twice as much as most other developed countries. The Congressional Budget Office has said that if medical costs continue to grow unabated, “total spending on health care would eventually account for all of the country’s economic output.”

Consumers, the patients, do not see prices until after a service is provided, if they see them at all.

Patients with insurance pay a tiny fraction of the bill, providing scant disincentive for spending (NoVA has told us this, of course).

Even doctors often do not know the costs of the tests and procedures they prescribe.

Insurers have limited incentive to bargain forcefully, since they can raise premiums to cover costs.

The article focuses on colonoscopies as a case study of an ordinary procedure run amok. If the American health care system were a true market, the increased volume of colonoscopies — numbers rose 50 percent from 2003 to 2009 for those with commercial insurance — might have brought down the costs because of economies of scale and more competition. Instead, it became a new business opportunity, and moved out of the office and into the hospital.

The cost of a colonoscopy in the United States varies staggeringly, from place to place, and even within a city. Austin averages four times Baltimore, for example. New York is even higher, of course.

It is the pricing of these ordinary medical procedures that surprises me as a major contributor to our inflated health care costs.

I recommend the linked article.

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