Why US health care costs defy common sense

July 08 09:30 2017 by ushadmin

When Jeffrey Kivi’s rheumatologist changed affiliations from one hospital in New York City to another, less than 20 blocks uptown, the price his insurer paid for the outpatient infusion he got about every 6 weeks to control his arthritis jumped from $19,000 to over $100,000. Same drug; same dose — though, Kivi noted, the pricier infusion room had free cookies, Wi-Fi and bottled water.

Mary Chapman, diagnosed with multiple sclerosis, started taking a then-new drug called Avonex in 1998, which belongs to a class of drugs called disease-modifying therapies. Approved in 1996, Avonex was expensive, about $9,000 a year. Today, two decades later, it’s no longer the latest thing — but its annual price tag is over $62,000.

Marvina White’s minor elective outpatient surgery to remove an annoying cyst on her hand was scheduled in 2014 based on her doctor’s availability. Because it was booked in a small facility that is formally classified as a hospital (with two operating rooms and 16 “spacious private suites”) rather than the outpatient surgery center where the doctor also practiced, the operating room fee was $11,000 rather than $2,000.

Len Charlap had two echocardiograms — sonograms of the heart — within a year: One, for $1,714, involved extensive testing at a Harvard training hospital; the other, for $5,435, was a far briefer exam at a community hospital in New Jersey.

It is not just that US healthcare is expensive, with price tags often far higher than those in other developed countries. We know that. At this point, Americans face astronomical prices that quite simply defy the laws of economics and — as each of the above patients noted when they contacted me — of decency and common sense.

‘The balance sheet just doesn’t work out’

“It’s the prices, stupid.”

This phrase, part of the title of a 2003 scholarly article in the journal Health Affairs explaining high US health expenditures, has been bandied about by a number of health economists for years.
But politicians have long been prone to ignore this essential wisdom. They do so today at their own peril. Outraged Americans at Town Hall meetings are wising up. Like patients who I’ve spoken to in my last few years of reporting, they have experienced the bankrupting and baffling illogic of US medical prices firsthand.

With the prices the US medical system demands for care, it’s no wonder that Republicans have had so much trouble finding a recipe to replace the Affordable Care Act, aka Obamacare, with “something better” for less money, as they’ve promised endlessly to do. Ironically, despite the extreme differences, the GOP is stumbling on the same underlying problem that ultimately tarnished the ACA in critics’ eyes: spiraling prices often necessitated skyrocketing premiums and deductibles, belying the “affordable” moniker. The balance sheet just doesn’t work out.

Any plan to solve America’s health care mess must confront this reality: Our prices for tests, drugs, hospitalizations and procedures — old or new — have gone up dramatically year by year, and are vastly higher than in other developed countries. Indeed, prices for similar interventions in other countries have often declined.

Why? The United States — more or less alone among developed countries — has no direct mechanism to rationalize prices for medical encounters, to insure they are at least nominally related to value. Worse still, we alone effectively allow businesses — mostly for-profit — to set the asking price. And, as these examples show, price and value have in many cases become completely uncoupled, allowing price to travel into the stratosphere…