HealthLawProf Blog

Editor: Katharine Van Tassel
Concordia University School of Law

Tuesday, February 12, 2013

A Tale of Two Stories - Growth in Health Care Costs is Down, but Nobody Knows How Much Things Cost

Two recent stories in the New York Times highlight the fact that our health care system is so dysfunctional, that we don't really have a clue as to how to fix it.  In a piece that has received a lot of media attention, a researcher discovered something that many of us already knew--that if you are trying to shop around for the best price for a health care service, you are out of luck.  Jaime Rosenthal, a student at Washington University in St. Louis, called more than 100 hospitals around the country, trying to get a price for a hip replacement for a 62-year-old (fictional) grandmother who would pay cash for the procedure.  Half of the hospitals would not provide any price estimate at all, while the other half quoted wildly divergent prices ranging from $11,100 to $125,798.  Some hospitals were willing to bargain, and lowered their prices for a self-pay patient when pressed.  For those who are proponents of "consumer-directed health care" (in which the consumer is given a certain amount of money to purchase health care, and is supposed to be able to shop around for the best price for the care), this points out the problems with assuming that anybody can be an"informed consumer" when it comes to health care services under our current system.  The inequity in bargaining power and the knowledge gap between the consumer and the provider is just too great.

So apparently, the cost of procedures currently depends solely on the amount of profit the provider thinks it needs to make.  Nevertheless, the New York Times today also reported a piece of good news regarding health care costs-- growth in health care costs is sharply and persistently slower than the Congressional Budget Office had expected.  Growth continues to be at the lowest rate in decades for a fourth consecuitive year.  The article says that the consensus is that doctors and hospitals are changing how they deliver health care to eliminate waste, insurers are no longer paying per procedure, and market forces are driving down costs.

The juxtaposition of these two pieces of news tells me that prices for health care procedures have been so inflated for so many years that providers can charge prices that are likely to exceed 10 times the cost of their services, while at the same time we can experience a slowing in the growth of health care costs.  I am usually a skeptic about plowing money into "demonstration projects" and research, but I am  beginning to think that any money we put into research on the actual costs of health care services and theamount of profits being made on such services will be money well-spent.  After all, we can't fix something we don't understand.


Cross-posted on Healthy Interests

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